AQUILA Austin Market Report 4Q 2016 by AQUILA Commercial

AUSTIN MARKET REPORT 4Q 2016

AQUILA KNOWS AUSTIN

KEEPING YOU INFORMED AQUILA Commercial is dedicated to

DISCLAIMER This report utilizes various

providing quality service to our clients. We

real estate and economic data sources. The

understand that real time market data helps

information contained herein is confidential

our clients make smart, informed real estate

and proprietary in nature. No warranties or

decisions. This report is produced and

guarantees are made as to the accuracy of

distributed quarterly. To receive our

the information contained herein.

updates, opt in at aquilacommercial.com.

VIEW FROM THE

EAGLE'S NEST The future is a funny thing, and trying to predict it is even funnier. A couple weeks ago, a news article hit my inbox titled "2017 Set to be Strong Year for Greater Austin Housing Market"1. One day later I received another with the headline "2017 Could Bring Slower Growth for Austin’s Housing Market"2. Both articles cite the same “expert” speaker from the same event, yet they came away

Clayton Schleimer

with quite disparate outlooks.

Market Research Analyst

Unfortunately, I lost my crystal ball

AQUILA Commercial

in my move down to Austin from

schleimer@aquilacommercial.com

the Dallas-Fort Worth area several years ago, so I can’t tell you exactly what the future holds for the Austin office market, but luckily neither can anyone else. All we can do is look at the historical trends and current statistics to draw our own conclusions.

VIEW FROM THE EAGLE'S NEST Looking back on 2016, Austin’s office market had quite

Following Thomas Properties Group’s aggressive play in

an impressive year. All fundamentals pointed in a positive

2007, asking rental rates downtown went from an average

direction, with almost 700,000 sf of space delivered and

of 20% higher than suburban rates to 35% during their

1.75 million sf absorbed over the past twelve months.

nearly six-year dominance of downtown (see chart on

Vacancy rates dipped below 10%, and average asking full

adjacent page).

service rental rates are knocking on the door of the $35/sf mark – the highest in the state of Texas and the 7th highest in the country.

The dynamics of Austin were undoubtedly different in 2007 than they are now, and the increase in downtown rental rates from 2007 to 2013 cannot solely be attributed to one

Since the end of the Great Recession, Austin has

landlord. Access to capital was much looser leading up

continuously

to the Great Recession, bringing a surplus of new product

posted

some

the

healthiest

office

online – especially in the suburban markets. In the past

fundamentals in the country. Despite these robust metrics, Austin is still primarily thought of as a second-tier market on a national level. While Austin may be making a strong case to enter the big leagues and

couple years there has been a healthier supply of new office space with respect to demand compared to the prerecession days.

is starting to compete with larger markets for investment

There were also fewer nearby alternatives to downtown.

dollars, some skeptics are wondering if we’re in the closing

The Eastside, for example, would not have even been

innings of the latest boom.

considered by large tenants ten years ago. These days, some

One player who is confident in the future of Austin is Cousins Properties. Following their recent merger with Parkway

tenants and landlords are willing to pay a premium to be on the Eastside to be in on the hip and trendy revitalization

Properties, Cousins is now the owner of four of Austin’s

of the area. In 2016, Los Angeles-based CIM Group made

premier downtown office properties, accounting for 16% of

a big play buying Eastside Village at a price per square

the total Class A office inventory in the CBD submarket. The

foot that rivals Class A properties in the more established

last time a single owner had this much control of a submarket

Northwest

in Austin was in 2007 when Thomas Properties Group

Oracle’s 625,000-sf campus under construction just south

acquired roughly 20% of the downtown Class A stock.

of Lady Bird Lake will further shape the landscape east of

and

Southwest

submarkets.

Additionally,

PERCENT CHANGES: 2011 TO 2016 (Source: CoStar) Asking Rental Rate

Vacancy Rate

Market Size

Employment

Austin

31%

4.1%

19%

USA

14%

2.6%

VIEW FROM THE EAGLE'S NEST

Average Class A Asking Rates Market CBD

$50.00

Citywide Suburban

$45.00

$40.00

Asking Rate

$35.00 $30.00

$25.00

$20.00

$15.00 $10.00

$5.00 $0.00 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Numbers based on CBRE statistics

CBD

Citywide

Suburban

I-35. Historically thought of as an inconvenient yet cheaper

Overall, the general appetite for office space in Austin

place for college students to live, young talent has already

seems to lean towards newer product. With such limited

begun flooding Riverside Drive – a phenomenon which

options for large blocks of space available throughout

could spark the interest of tenants and office developers

the city – particularly downtown – preleasing activity is

alike in the years ahead.

strong among both under construction and proposed projects

Furthermore, the Domain was still in its infancy and not quite yet seen as Austin’s “second downtown.” Having

with almost 50% of the square feet under construction spoken for.

proven itself as a viable contender to cater to the young,

This high demand has garnered the attention of

techy demographic that Austin is known for, some tenants

sophisticated investors from around the country and the

like Facebook and WeWork are now drastically expanding

globe, making Austin less and less of a “small town.” While

their operations to the area. Expect to see other large

no one can definitively tell you what the future holds for the

tenants occupy the Domain in the next couple years as

city, historical trends and the current state of the market

the Domain is about to double its office space with

point to another exciting year in 2017.

the potential kick-off of projects like Domain Tower and Domain 11 & 12.

¹Navoy, S. "2017 Set to be Strong Year for Greater Austin Housing Market" <http://keyetv.com/news/local/2017-set-to-be-strong-year-for-greater-austin-housing-market> ²Hasan, S. "2017 Could Bring Slower Growth for Austin’s Housing Market" <http://kut.org/post/2017-could-bring-slower-growth-austins-housing-market>

SPECIAL REPORT

BUYING INTO AUSTIN: IS IT TOO LATE? The Austin commercial real estate market has been on a tear since the dark days of the Great Recession. In a half decade, the city has seen over five million square feet of office space delivered and sales prices per square foot more than double. Institutional investors are also starting to buy into what Austin has to offer. Over the past three years, Austin has seen a noticeable increase in institutional capital entering the market1. In fact, in 2016 institutional investors made up 41% of all transactions in terms of dollar value, and institutional-grade assets saw a 30% increase in transaction volume2. Even with strong market indicators, the cyclical nature of real estate and the threat of rising interest rates is causing the question of sustainability in the Austin market to become commonplace. In this report, we take a look into capital markets and leasing trends to determine whether investing in commercial real estate in Austin will continue to provide attractive returns for investors.

Institutional investor is defined as investors such as hedge funds, investment banks, life insurance companies, pension funds, etc. who typically deploy capital into assets worth at least $40 million. 1

Source: Real Capital Analytics

SPECIAL REPORT THE FUNDAMENTALS

of an investment. Factors such as rental, vacancy and

When aggregating cap rates for multiple transactions

overall desirability, and the likelihood that the market

in a given market and time period, a snap-shot of

will continue to be “hot” or “cold” cannot. The closest we

overall investor sentiment towards that market can

can get to measuring such values is to look at the market

be achieved as it relates to the overall investment

value, or the amount of money someone is willing to pay

universe. The closer a market’s average cap rate is to a

for the opportunity to realize the potential benefits of the

low-risk investment metric, such as the 10-year treasury

future desirability of an investment. So let’s take a look at

yield, the more confident investors are that investing in

the dynamics of the Austin investment scene3.

employment rates can be measured, while geography,

that market will provide them suitable returns for their portfolio.

WHERE ARE WE NOW?

Large, core markets such as New York and San Francisco have substantially lower cap rates than

For this analysis, we picked a competitive set of markets

smaller markets where there is greater opportunity

to compare to Austin: including San Francisco, New

for return. In terms of downside risk and net dollars

York, San Jose, Seattle, Los Angeles, Boston, Nashville

returned, investing in these smaller markets might not

and Raleigh.

make sense to investors – especially sophisticated

In terms of average sales price, Austin currently ranks

institutional investors who are looking to deploy large

towards the bottom of this list, with an average sales

amounts of capital into core assets.

price of $309/sf, beating out only Raleigh ($165/

So, where does the Austin office market fit into this

sf) and Nashville ($185/sf), with the nationwide

matrix of investments? There are many factors that

average sales price at $250/sf 4.

come into play when determining whether a market

New York and San Francisco properties are trading

is worth investing in. Cap rates are just the tip of

at the highest values, coming in at $451/sf and

the iceberg when it comes to measuring the value

$578/sf, respectively.

Not surprisingly,

Average Sales Prices ($/sf) Average Sales Prices ($/sf)

$600

San Francisco

$550

$500

New York

$450 San Jose

$400

Boston $350

Seattle

$300

Los Angeles Austin

$250

USA

$200 Nashville Raleigh

$150

$100

$50 $0 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: Real Capital Analytics

Austin

Raleigh

Los Angeles

San Jose

New York

Nashville

Seattle

Boston

San Francisco

USA

2016

2017

SPECIAL REPORT In terms of recent growth over time, however, Austin blows the other markets out of the water. Going back to 2011, when commercial real estate activity started to pick back up following the end of the Great Recession, Austin sales prices per square foot have increased by over 200%, going from an average of $99/sf5 in 2Q 2011 to the $300/ sf+ we see today. The only other market to more than double over the same time period is San Francisco, which leapt from $231/sf to $578/sf. % Difference in Average Sales Price ($/sf) % Difference in Average Sales Price ($/sf) Austin

200% 180% 160%

San Francisco

140% 120% 100% 80%

San Jose

60% Boston New York Los Angeles Nashville USA Seattle

40% 20% 0% -20%

Raleigh

-40% -60% 2011

2012

2013

2014

2015

2016

Source: Real Capital Analytics

Historically, the average value of Austinâ&#x20AC;&#x2122;s sales have been on par with or below the national average. Then, in 2011, sales prices began a very steady march upwards, surpassing the national average in 2014 and today almost 25% higher. Despite this dramatic increase, cap rates in Austin have remained relatively flat over the past three years. Average Cap RatesRates Average Cap 9.00%

8.00% Nashville 7.00%

USA Austin Raleigh Seattle Los Angeles New York

6.00%

Boston San Jose San Francisco

5.00%

4.00%

3.00%

10-Year Treasury Yield

2.00%

1.00%

0.00% 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: Real Capital Analytics and U.S. Department of the Treasury

For a list of assumptions maintained in this analysis, see the end of the report.

Source: Real Capital Analytics

Since Austin was coming back from a great recession, most of the purchases were from foreclosures, which explains why this number was so low in 2011.

SPECIAL REPORT MEASURING THE HEALTH OF A MARKET Much like there are many ways to determine the health of any investment, there are many ways to measure the health of a market. Employment rates, GDP and inflation are all very useful metrics in determining the strength of an economy, but these do not fully capture the commercial real estate behavior. When looking at common commercial real estate leasing metrics such as rental rates, vacancy rates, absorption, etc., it is difficult to compare markets to one another, as each market’s quarterly performance is viewed relative to its historical trends, market size, etc. For our analysis, we want to measure the health of a market’s commercial real estate industry from a potential investor’s perspective by combining leasing and sales metrics to create an overall “Health Index.” For our purposes, we defined the Health Index as the ratio of rent being paid to the rent not being paid in a specific market. To measure the rent being paid in a market, we took the implied net operating income for the sales of the market, multiplied by the occupied square feet. To measure the rent not being paid in a market, we multiplied the total vacant square feet by the average asking rental rate.

Health Index

Income Generated Income Not Generated

≈

Implied Avg NOI × Occupied SF Vacant SF × Avg Asking Rental Rate

Avg Cap Rate × Avg Sales Price × Occupied SF Vacant SF × Avg Asking Rental Rate

While these are not scientific measurements, it can be a useful tool to compare markets, look at trends over time and normalize demand across markets of varying sizes. The Health Index attempts to measure investment opportunity by combining investor sentiments with the leasing environment. If a market has a high Health Index rating, it can be attributed to factors such as high NOI, high occupancy and/or high rental rates. When you have a high Health Index, in most cases, it’s because all of these factors are moving in sync. So, how does Austin stack up against its competitors in terms of health? Very well. In fact, it has been the “healthiest” for the last eight quarters. The Health Index on the next page also helps visualize worst-case scenarios. If there were a nation-wide economic collapse where employment growth went to zero and investors were caught with their pants at their ankles because there would be no new demand for space in their properties, those with holdings in Austin would be in the best situation given the relationship between low vacancy rates and high average implied NOI. If an investor was holding a 100,000 sf property in New York at 10% vacant with no demand for that vacant space, they would virtually be losing $638,800 per year of possible income on that vacant space – a space for which they paid roughly $500/sf.

SPECIAL REPORT In Austin, however, a 100,000–sf property costing roughly $300/sf at 10% vacant and no possibility of leasing would only be losing the investor $237,800 per year6. In other words, an investor choosing New York over Austin would have paid roughly 1.6 times as much to lose 2.6 times as much as the investor who chose Austin.

Health Index

Health Index Austin

Nashville 10 San Francisco 9

Seattle

San Jose

Boston

New York

Raleigh

4 Los Angeles 3

1 0 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: Real Capital Analytics and CBRE Econometric Advisors

LOOKING BACK TO SEE FORWARD: WILL AUSTIN REMAIN HEALTHY? When looking at the health index above, one of the most obvious questions is how sustainable is Austin’s health? Will Austin’s health trajectory follow that of New York’s in 2008, or has Austin already seen its peak? While nearly every market’s health suffered during the last recession, New York never bounced back as much in recent years as other markets after being near or at the top every quarter prior to the recession. From a fundamental point of view, the driving factor of New York’s lack of rebound can be attributed to a supply and demand issue: there was too much product being delivered in relationship to employment growth. From 2009 to 2015, the employment growth in New York was among the lowest among this competitive set of markets in terms of percentage change – increasing just 7.5% over the seven-year period. Meanwhile, Austin’s employment growth has been the highest among the competitive set, increasing by more than 30% since 2009. The chart on the next page illustrates that Austin has added the least amount of office space (supply) relative to employees added (demand).

Calculations based on current market conditions according to Real Capital Analytics and CBRE Econometric Advisors

SPECIAL REPORT % Difference in NRA (Net Rentable Area) per Employed Person Since 2009 % Difference in NRA per Employeed Person since 2009

0% Seattle

-2%

-4%

New York Boston

-6%

San Jose Los Angeles

-8%

-10%

San Francisco

-12%

Nashville

-14%

Raleigh

Austin

-16% 2009

2010

2011

2012

2013

2014

2015

2016

Source: CBRE Econometric Advisors and U.S. Bureau of Labor Statistics

Austinâ&#x20AC;&#x2122;s conservative growth in office supply over the past seven years plays an important role in the overall investment scene as well. Institutional capital typically represents a likely source of investment in new office product upon stabilization. As new buildings are typically anchored by long term leases with good credit tenants, these projects trade at relatively low cap rates. Limited new construction has yielded limited opportunity to invest in this corner of our market and could be a contributing factor to cap rates sustaining their relatively higher levels. This extreme growth in employment relative to market size further sets Austin apart from its peers in coming years. As employees and employers expand or migrate their operations from the coasts to the more business-friendly state of Texas, employment will continue to provide ample opportunity for commercial real estate investments in the area. Furthermore, when compared to its in-state rivals of Dallas, Houston and San Antonio by the folks on the coasts, Austin is often desirable for relocations because of its unique culture and geographical features. Barring an economic downturn â&#x20AC;&#x201C; and so long as owners, developers and lenders continue to proceed as cautiously as they have in recent years â&#x20AC;&#x201C; the tightening of the market squeezing rents upwards should continue to bring great value to investors. Increasing rental rates brought about by high occupancy levels should continue to provide solid returns to investors, and continue to make Austin an attractive increment market that is not too late to buy into.

ASSUMPTIONS 1. Investor allocations are consistent This analysis assumes that overall investor sentiment towards commercial real estate remains consistent with historical trends. That is to say that there is not more or less investment dollars flowing into or out of commercial real estate and into other investment forms. This ensures that, looking forward, values are not inflated or deflated due to an economy-wide shift in demand for commercial real estate. Furthermore, this assumption ensures that there are ample transactions occurring in the market to encapsulate overall market trends and investor sentiments.

2. Access to capital is consistent One of the primary drivers of commercial real estate transactions is the accessibility investors have to capital from financial institutions. If commercial real estate loans dry up nation-wide, then transactions will become sparser, or market values will be skewed due to an abnormal lack of capital. For example, in the last economic downturn from 2008 to 2012, there were not enough transactions recorded in Austin to surmise any sort of market-wide trends due to an essential halt in banksâ&#x20AC;&#x2122; appetites for providing commercial real estate financing. This analysis assumes the demand for commercial real estate on a national or global level does not shift towards other vehicles such as stocks and bonds on a level that will affect all commercial real estate markets moving forward. 3. Inflation remains steady The return on an investment is only as good (or bad) as its relative ability to purchase or invest in goods at the time of sale. Real estate offers some protection against inflation as rental rates provide increased cash flow in a highinflationary period. However, this affects cap rates as well, as the numerator (Net Operating Income) could increase disproportionately to the value at which an asset will be sold. Given these assumptions, the primary driver of market values in this analysis is the supply/demand dynamic of each market.

AUSTIN CITYWIDE 4Q UPDATE 491,623 SF Net Absorption

9.20%

Direct & Sublease Vacancy Rate

$38.84

Avg. Class A Full Service Rental Rate

SNAPSHOT:

CAPITAL MARKETS MAJOR SALES TRANSACTIONS DOMAIN 2 & 7

SOLD

823 CONGRESS

SOLD

EXCHANGE PARK

Market

Northwest

Market

CBD

Market

Northwest

Class

Size (SF)

337,000

Size (SF)

181,381

Size (SF)

153,123

Buyer

TIER REIT

Buyer

Brickman

Buyer

Seamless Capital

Seller

Shorenstein

Seller

Cielo Property Group

Seller

Equity Commonwealth

Price

$153,335,000

Price

$62,939,207

Price

$29,200,000

Price/SF

$455

Price/SF

$347

Price/SF

$191

SOLD

PECAN PARK

SOLD

THE ESCALADE

Market

Northwest

Market

Southwest

Class

Size (SF)

136,444

Size (SF)

115,039

Buyer

Mark IV Capital

Buyer

Wedge Commercial

Seller

Equus Capital Partners

Seller

TA Realty

Price

$33,565,224

Price

$25,000,000

Price/SF

$246

Price/SF

$217

SOLD

ONE ELEVEN

SAN JACINTO

SOLD CENTER

Market

CBD

Market

CBD

Class

Size (SF)

548,823

Size (SF)

410,248

Buyer

Cousins Properties

Buyer

Cousins Properties

Seller

Parkway Properties

Seller

Parkway Properties

One Eleven

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

CBD • Capital Factory renewed for 56,703 sf in Austin Centre early in October. This early renewal makes them the second largest tenant in the building behind Netspend, as Capital Factory now occupies the 16th, 5th and part of the first floor.

• CBRE signed for 21,688 sf on the 17th floor of 500 West 2nd. Currently occupying roughly 20,000 sf on the 5th floor at 100 Congress, their existing space is one of the largest and most expensive contiguous spaces coming available downtown in 2017.

• One more floor of Shoal Creek Walk was taken off the market this quarter as Cirrus Logic signed for the 10th floor bringing the Schlosser Development project to 66% preleased. Cirrus Logic will move into roughly 100,00 sf – almost half the building – on the 6th through 10th floors upon delivery in the third quarter of 2017.

NORTHWEST • In the biggest lease of the quarter, eBay renewed for 214,691 sf at 7700 Parmer, Building D, making them the sole tenant in the building.

• HomeAway (Expedia) and Visa each took a floor of Charles Schwab’s sublease at Research Park Plaza IV early in November. HomeAway took one floor for 49,312 sf while Visa took another 48,167 sf. Charles Schwab, who has been in Research Park Plaza for more than ten years, continues to move employees into its new campus adjacent to the Domain.

• Informatica signed for nearly 43,000 sf at Paloma Ridge Building B. Delivered a year ago, this lease brings one of the submarket’s newest buildings to 65% leased (Building A still sits 32% leased). Informatica’s previous space at Aspen Lake One (35,824 sf) is now being marketed for sublease and direct occupancy.

ALL MAJOR LEASES SIGNED Tenant

Property Name

Submarket

Transaction Type

eBay

7700 Parmer Ln

Northwest

214,691

Renewal/Expansion

Indeed

Reserve at Bull Creek

Northwest

88,000

New

Capital Factory

Austin Center

CBD

56,703

Renewal

HomeAway

Research Park Plaza

Northwest

49,312

Sublease

Visa

Research Park Plaza

Northwest

48,167

Sublease

Informatica

Paloma Ridge Bldg 2

Northwest

42,996

New

Banker's Toolbox

Riata Corporate Park Bldg 3

Northwest

31,715

Expansion

Three Rivers Energy

5301 Southwest Parkway

Southwest

23,956

New

Netsuite

Riata Corporate Park Bldg 3

Northwest

22,963

Expansion

Intific

The Campus at Arboretum 4

Northwest

22,032

Renewal

CBRE

500 West 2nd

CBD

21,688

New

Cirrus Logic

Shoal Creek Walk

CBD

21,218

Expansion

Ovation Partners

Shoal Creek Walk

CBD

21,000

New

MongoDB

The Park on Barton Creek

Southwest

20,190

Renewal/Expansion

OFFICE SUBMARKET MAP: MAP: OFFICE SUBMARKET

Round Rock

Cedar Park

CBD

Cedar Park

Pﬂugerville Pﬂugerville

Lake Travis

McNeil

Lake Travis

Arboretum

Central

North

North Northwest

McNeil

Arboretum

CBD

Central

Domain

Southwest Northwest

Domain

South/Southeast

Southwest

East/Northeast

South/Southeast

Round Rock

East/Northeast

Tarrytown West Lake Hills

West Lake Hills

Round Rock

Austin

Tarrytown

Austin Sunset Valley

ABIA

Sunset Valley

ABIA

Buda

AUSTIN OFFICE

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





2017

2018

The Diamond Building at Mueller

35,015 SF

East

The Station on Manor

31,600 SF

East

500 West 2nd

489,404 SF

CBD

Domain 8

195,230 SF

Northwest

2Q Galleria Oaks I & II

147,928 SF

Southwest

Walsh Tarlton Overlook

55,500 SF

Southwest

Lantana Ridge I & II

175,000 SF

Southwest

Fourth &

42,000 SF

East

3Q Domain Tower

308,000 SF

Northwest

University of Texas Systems

342,000 SF

CBD

Shoal Creek Walk

218,432 SF

CBD

The Overlook at Barton Creek

53,091 SF

Southwest

4Q Westview*

98,500 SF

CBD

MoPac Centre

95,863 SF

Northwest

801 Barton Springs

90,500 SF

South

Oracle Campus

625,000 SF

Southeast

*Already existing – coming to market 4Q 2017

Springdale General

165,000 SF

East

4Q Third + Shoal

338,279 SF

CBD

î&#x192;¡ PLANNED Future Developments

Future Developments

405 Colorado

195,511 SF

CBD

604 W 6th Street

31,035 SF

CBD

Austin American Statesman

TBD SF

CBD

Extended Stay Site

TBD SF

CBD

Travis Courthouse

TBD SF

CBD

Novare/Post Office

TBD SF

CBD

Waller Park Place

680,000 SF

CBD

Third + Shoal

338,279 SF

CBD

Velocity Credit Union

TBD SF

UT Office Site 901 E 6th

Four Points Centre, Phase II - Building 3

300,000 SF

Northwest

Amber Oaks Phase IV Buildings K, L, M

225,600 SF

Northwest

Quarry Oaks IV

160,000 SF

Northwest

Aspen Lake Three

128,700 SF

Northwest

Research Park Bldg 6

117,321 SF

Northwest

Paloma Ridge C

112,500 SF

Northwest

CBD

Four Points Centre, Phase II - Building 4

80,000 SF

Northwest

+/- 600,000 SF

CBD

Riata Corporate Park Bldg 1

65,000 SF

Northwest

132,000 SF

East

Riata Crossing Bldg 6

49,716 SF

Northwest

Canopy

40,200 SF

East

Frontera Ridge

400,000 SF

Northwest

Cityline at MLK

134,000 SF

East

St. Elmo

225,000 SF

South

Mueller Market District

2,000,000 SF

East

Regency Park

90,000 SF

Southwest

Plaza Saltillo

120,000 SF

East

Rollingwood Center III

107,000 SF

Southwest

The Foundry (310 Comal)

75,369 SF

East

Seven Oaks I & II

279,343 SF

Southwest

171,450 SF

Southwest

The Lakes at TechRidge Buildings A & B

97,600 SF

East

The Backyard Buildings B, J, & H

The Park at Mueller

116,000 SF

East

The Terrace 3

203,130 SF

Southwest

Preserve at 620

50,000 500,000 SF

Northwest

The Terrace 4

285,663 SF

Southwest

Frontera Ridge I & II

400,000 SF

Northwest

The Terrace 5

218,809 SF

Southwest

Domain 12

316,345 SF

Northwest

Upland Corporate Center Phase II

123,525 SF

Southwest

Domain 11

315,862 SF

Northwest

CBD SUBMARKET 4Q UPDATE BY BART MATHENEY | Principal, AQUILA Asset Services

2,908 SF Net Absorption

6.41%

Direct & Sublease Vacancy Rate

$56.02

Avg. Class A Full Service Rental Rate 9th & Congress; Photo by Scott Mason Photography

CBD UPDATE

2016 closed with the first decrease in vacancy rates among Class A competitive set buildings since the fourth quarter of 2015, dropping just four basis points over the previous quarter from 6.45% to 6.41%. The majority of this decrease can be attributed to nearly 10,000 sf of sublease space being absorbed. Meanwhile, there are only about 6,500 more square feet directly vacant compared to the third quarter. These insignificant figures point to how tight

in roughly half the competitive set buildings1. Average operating expenses broke past $20/ sf, with Frost Bank Tower quoting the highest rate at $26.38. Two of the smallest and oldest buildings in the competitive set – Littlefield and Scarbrough – actually saw significant decreases in their new operating expense rates dropping by $2.16 and $2.45, respectively. These two buildings are also the only buildings in the competitive set to receive tax breaks due to their designation as historical landmarks.

the downtown market is right now. In fact, there were no new large leases signed this quarter in any existing buildings. The large leasing activity occurred in buildings currently under construction: Cirrus Logic took another floor in Shoal Creek Walk, where Ovation Partners also took a floor this quarter; and CBRE signed for part of the 17th floor at 500 West 2nd. Asking full service rates increased yet again for the 25th consecutive quarter – the longest streak in the eleven years we’ve been tracking the competitive set. Contributing significantly to this quarter’s increase was operating expenses, which are now reflective of their 2017 estimates

Third+Shoal Rendering; Courtesy of CoStar

CBD UPDATE

There are multiple entitled sites whose owners are vying for the chance to become Austin's next premier downtown office building.

In AQUILAâ&#x20AC;&#x2122;s 4Q 2015 report, we reported that 5th + Colorado was 31% preleased and Shoal Creek Walk and 500 W 2nd were each 42% preleased. Since then, these three new downtown office buildings have gone from a combined 40% leased to 74% leased, accounting for over 300,000 sf of leasing activity between the three buildings. By comparison, in the other 21 competitive set buildings, there was just less than 400,000 sf of direct leasing activity in 20162. Given this information, new developments are the hottest commodity in downtown Austin. With over 1,600 multifamily units and nearly 2,000 hotel rooms under construction downtown, the area is poised for continued growth from a live/ work/play perspective. However, with only two office projects set to deliver in 2017 and with robust interest among tenants for the remaining 200,000 sf between them, the pressure is on for the next wave of developments to cater to the work aspect of the live/work/play equation. Third + Shoal appears to be the next building

out of the ground as they continue site work and are scheduled to go vertical in the first half of 2017. With strong activity on roughly 100,000 sf now, spaces are slated to be ready for TIs around mid-to-late 2018. Trammell Crow appears to be close behind with the last phase of Green Water getting set to launch in early 2018. 2017 is undoubtedly shaping up to be an interesting year in terms of new developments. As the hub of downtown continues to migrate south and west of the traditional epicenter of 6th and Congress, projects are being introduced in all directions, and there are multiple entitled sites whose owners are vying for the chance to become Austinâ&#x20AC;&#x2122;s next premier downtown office building.

For the complete list of competitive set buildings and their corresponding availability and lease rates, see page 45 in the appendix. 1

Source: CoStar

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

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

2016 Q3

6,650,834

331,435

97,862

-25,262

6.45%

$54.62

2016 Q4

6,650,834

337,907

88,482

2,908

6.41%

$56.02

*Absorption includes sublease space

NET ABSORPTION

600

12%

400

200

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

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%

89%

(100)

Di rect & Subleas e Vacancy Rate

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Occupancy Rate

AVAILABLE SF VS. VACANCY RATE

88%

Di rect & Subleas e Occupancy Rate

$57

11%

$55

10%

$53

$51

$49

$47

$45

$43

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

Di rect & Subleas e Vacancy Rate

CBD DEVELOPMENT & LARGE AVAILABILITY

WES TVIE

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

11th

Stre

SHO CRE AL E WA K LK

604 W. SIX TH

ar B Lam N.

RISE 8TH NUE + CES

EXT EN S TAY DED 5TH UT S SITE YST WES & EMS 300 T W EST END 6TH POS EAVOR / TO ALO FFIC FT E UT OF E IND THE LEM & FICE EPE ENT SITE NDE HOT NT EL Z GAB AZA/ THIR THE LES AUS SHO D + TRA TIN 4 A VIS PRO L COL 05 G COU PER O RAD RES REEN W RTH 500 IDEN O OUS WES TIAL ATER E T 2N TOW D NO ER RTH 301 SHO CON RE GRE SS

lvd.

5th

Stree

6th S

treet

Bar

ton

Spr

ings

Rd.

801 BA SPR RTON ING S 25

ress Ave .

Cesa r

Con g

S. 1

st Str eet

E EL EV

AU AM STIN E STA RICAN TESM AN

Cha

vez

St.

FAIR M HOT ONT EL

W PAR ALLER KP LAC E

70 RAI NEY

LARGE BLOCKS OF CONTIGUOUS AVAILABILITY

BRA CKE CAM NRIDG E PUS

VEL OCI UNI TY CRE D ON SITE IT

Building

Available SF

Max. Contiguous

300 West 6th

31,424 SF

29,952 SF

301 Congress

37,360 SF

20,591 SF

One Eleven

44,849 SF

23,142 SF

OFFICE PROJECTS UNDER CONSTRUCTION Building

Est. Delivery

% Preleased

Total SF

500 West 2nd

69%

500,436 SF

1Q 2017

Shoal Creek Walk

63%

218,432 SF

3Q 2017

UT Systems

95%

342,000 SF

3Q 2017

Westview

98,500 SF

4Q 2017

801 Barton Springs

90,500 SF

4Q 2017

Third + Shoal

338,279 SF

4Q 2018

HOTEL/RESIDENTIAL UNDER CONSTRUCTION Building

Units/Rooms

Est. Delivery

Northshore

436 Units

1Q 2017

Rise â&#x20AC;&#x201C; 8th & Nueces

196 Units

1Q 2017

250 Rooms, 120 Units

2Q 2017

The Austin Proper Aloft & Element

422 Rooms

3Q 2017

1,066 Rooms

3Q 2017

5th & West

154 Units

4Q 2017

70 Rainey

164 Units

2Q 2017

The Independent

370 Units

3Q 2018

226 Units, 160 Rooms

TBD

Fairmont

Hotel Zaza/Gables

FUTURE/PLANNED DEVELOPMENTS Building

604 W 6th Street

Size/Units

Use

31,035 SF

Office

405 Colorado

195,511 SF

Office

Waller Park Place

680,000 SF

Office

Austin American Statesman

TBD

Office

Endeavor/Post Office

TBD

Office

Travis Courthouse

TBD

Extended Stay Site

TBD

Office

Green Water Residential Tower

TBD

Mixed Use

Brackenridge Campus

TBD

Medical

Velocity Credit Union Site UT Office Site

TBD

+/- 600,000 SF

Office

AVAILABILITY SUMMARY CBD CLASS A SUBLEASE SPACE AVAILABLE SPACE 32 31 30 29

12,085 SF

24 23 22 21

29,952 SF

20 19

1,472 SF

3,088 SF

32,603 SF

33,932 SF

11,528 SF

10,134 SF

6,861 SF

1,388 SF

9,421 SF

23,798 SF

2,277 SF

3,754 SF

6,969 SF

5,297 SF

20,591 SF

2,809 SF

12,742

1,272

1,246 SF

19,912

2,962

7,887 SF

2,893 SF

7,254

3,722

5,811 SF

6,432

6,858

4,571 SF

20,396 SF

17,400 SF

4,965 SF

4 10,559 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 $22.69 Op/Ex $61.69 - $62.69 Gross

454,225 SF 23 Floors 93% Leased $38.00 NNN $25.78 Op/Ex $63.78 Gross

428,419 SF 22 Floors 91% Leased $34.00-35.00 NNN $22.52 Op/Ex $56.52-$57.52 Gross

281,196 SF 17 Floors 96% Leased $28.00 NNN $17.47 Op/Ex $45.47 Gross

500,436 SF 29 Floors 69% Pre-Leased $40.00 NNN $15.50 Op/Ex $55.50 Gross

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

258,176 SF 26 Floors 94% Leased $34.00 NNN $18.05 Op/Ex $52.05 Gross

179,000 SF 18 Floors 97% Leased $40.00 NNN $17.39 Op/Ex $57.39 Gross

503,951 SF 32 Floors 100% Leased $35.00 NNN $20.86 Op/Ex $55.86 Gross

Availability Summary

33 32 31 30

21,218 SF

10,218 SF

7,834 SF

27 26 25

11,061 SF

3,997 SF

3,325 SF

21,218 SF

4,797 SF

23,142 SF

2,027 SF

7,322 SF

10 9

6,690 SF

8 7

3,663 SF

6,191 SF

701 SF

2,111 SF

10,821 SF

12,648 SF

14,328 SF

4,403 SF

1,318 SF

6 7,306 SF

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 96% Leased $32.00 - $35.00 NNN $17.59 Op/Ex $49.59 - $52.59 Gross

326,335 SF 16 Floors 90% Leased $28.50 NNN $19.92 Op/Ex $48.42 Gross

389,503 SF 21 Floors 99% Leased $37.00 NNN $19.85 Op/Ex $56.85 Gross

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

535,078 SF 33 Floors 96% Leased $38.00 -$43.00 NNN $26.38 Op/Ex $64.38 -$69.38 Gross

194,749 SF 13 Floors 100% Leased $35.00 NNN $23.50 Op/Ex $58.50 Gross

518,385 SF 30 Floors 91% Leased $35.00 -$37.00 NNN $18.15 Op/Ex $53.15 -$55.15 Gross

406,279 SF 21 Floors 100% Leased $36.00 NNN $23.73 Op/Ex $59.73 Gross

218,432 SF 14 Floors 66% Leased $32.00 -$36.00 NNN $16.50 Op/Ex $48.50 -$52.50 Gross

eBay extended and expanded its presence at 7700 Parmer in 4Q 2016; Photo by Third Eye Photography

NORTHWEST UPDATE

NORTHWEST SUBMARKET 4Q UPDATE BY CHAD BARRETT | Principal, AQUILA Asset Services

314,319 SF Net Absorption

10.12%

Direct & Sublease Vacancy Rate

$35.99

Avg. Class A Full Service Rental Rate

The fourth quarter of 2016 was indicative of the strong year the Northwest office market experienced. In 4Q an impressive 314,319 sf of space was absorbed. Additionally, the vacancy rate for the competitive set of Northwest office buildings fell from 12.2% to 10.1% in the fourth quarter, marking a 186 basis-point decrease from just one year ago. Rental rate growth continued its steady trend upwards to a new all-time high of $35.99.

NORTHWEST UPDATE

All three micromarkets had significant leases signed in the closing months of the year. eBay extended and expanded its presence at 7700 Parmer in the Far Northwest. Indeed signed to reoccupy 88,000 sf on a short-term basis in the Shepherd Mountain area as it explores potential sites for an expansion in excess of 750,000 sf in the Northwest market. And, of course, the Domain continues to be the most sought-after northwest location as all of the new product has been spoken for, with large deals done recently by Facebook, Amazon, HomeAway (Expedia) and WeWork. Large leases like these point to the entire area being a hotbed for large technology companies looking to recruit the Austin-area talent.

Due to its extraordinary demand, several new projects have either been started or announced in the Domain area, including Stonelake Capital and HPIâ&#x20AC;&#x2122;s Domain Tower (300,000 sf) and Domain 11 & 12 (600,000 sf) by TIER REIT and Endeavor, which appear to be close to breaking ground soon. The hubbub surrounding the Domain of late resulted in the purchase of Domain 2 & 7 by TIER REIT at an impressive suburban price of $455/sf. With limited product set to deliver in 2017 and barring any significant downturn in the economy, the Northwest office market should continue to favor landlords.

Round Rock Cedar Park

FAR NORTHWEST/ ROUND ROCK PďŹ&#x201A;ugerville

Lake Travis

McNeil

Arboretum

Domain

SHEPHERD MOUNTAIN/ 2222

ARBORETUM/ DOMAIN

West Lake Hills

Tarrytown

Austin NORTHWEST MICROMARKETS

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

2015 Q1

12,931,909

992,194

292,334

319,783

9.93%

$33.39

2015 Q2

13,120,924

897,199

284,035

292,309

9.00%

$33.83

2015 Q3

13,634,732

1,453,835

287,248

-46,041

12.77%

$33.40

2015 Q4

14,156,083

1,460,249

235,206

566,979

11.98%

$34.14

2016 Q1

15,142,863

1,422,335

395,496

864,404

12.00%

$35.14

2016 Q2

15,142,863

1,471,413

425,470

-79,052

12.53%

$35.44

2016 Q3

15,142,863

1,363,757

483,190

49,936

12.20%

$35.72

2016 Q4

15,142,863

1,238,333

294,295

314,319

10.12%

$35.99

*Absorption includes sublease space

NET ABSORPTION 12%

1,200

800

400 0

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

1,000

95%

800

93%

600

91%

400

89%

200

87%

85%

(200)

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Occupancy Rate

15%

1,600

Absorption (Thousands of SF)

2,000

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

83%

Di rect & Subleas e Vacancy Rate

Net Abs orption*

Di rect & Subleas e Occupancy Rate

$37

15%

$36

14%

$35

13%

$34

12%

$33

11%

$32

10%

$31

$30

2014 Q4

2015 Q1

2015 Q2

2015 Q3

Average Class A Full Service Rental Rate

2015 Q4

2016 Q1

2016 Q2

2016 Q3

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

Di rect & Subleas e Vacancy Rate

CEDAR PARK

ROUND ROCK

PFLUGERVILLE 7

10 14

18 9

LAKE TRAVIS

21 19

ARBORETUM 12

DOMAIN

SHEPHERD MOUNTAIN

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

Building

Direct Vacant SF

Sublease Available SF

Total Available SF

Broadmoor 906

144,249

Braker Pointe III

131,404

Paloma Ridge A

103,368

Paloma Ridge B

81,101

Austin Oaks

60,338

Lakewood Center I

45,620

Amber Oaks J

Park Centre Bldg 3

Riata Corporate Park Bldg 8

Research Park Place 7

The Park at 8300 N. MoPac

Building

Direct Vacant SF

Sublease Available SF

Total Available SF

River Place Corporate Park II

21,306

16,662

37,968

Aspen Lake One

36,038

103,368

Research Park Place 8

33,518

81,101

Domain 3

33,390

1,248

61,586

Atrium Office Centre

32,952

10,182

55,802

Lakewood on the Park B

29,324

21,311

33,147

54,458

Riata Corporate Park Bldg 2

7,054

21,148

28,202

45,711

Park Centre Bldg 1

24,305

3,279

27,584

45,457

Bridgepoint Square 4

15,330

10,328

25,658

1,393

40,279

41,672

Prominent Pointe I

25,204

38,869

Lakeview Plaza

9,276

15,344

24,620

NORTHWEST AUSTIN OFFICE DEVELOPMENT Building

Total SF

Percent Preleased

Estimated Delivery

Status

Domain 8

195,230

94%

2017 Q1

Under Construction

Domain Tower

308,000

2017 Q3

Under Construction

MoPac Centre

Preserve at 620

95,863

2017 Q4

Under Construction

50,000 - 500,000

Planned

Frontera Ridge I & II

400,000

Planned

Domain 12

316,345

Planned

Domain 11

315,862

Planned

Four Points Centre, Phase II - Building 3

300,000

Planned

Amber Oaks Phase IV - Bldgs K, L, M

225,600

Planned

Quarry Oaks IV

160,000

Planned

Aspen Lake Three

128,700

Planned

Research Park Bldg 6

117,321

Planned

Paloma Ridge C

112,500

Planned

Four Points Centre, Phase II - Building 4

80,000

Planned

Riata Corporate Park Bldg 1

65,000

Planned

Riata Crossing Bldg 6

49,716

Planned

Under Construction

ROUND ROCK

CEDAR PARK

PFLUGERVILLE 9

4 8

LAKE TRAVIS

ARBORETUM

7 1

DOMAIN

3 34

SOUTHWEST SUBMARKET 4Q UPDATE

BY MAX MCDONALD | Associate, AQUILA Corporate Services

105,799 SF Net Absorption

9.54%

Direct & Sublease Vacancy Rate

$39.52

Avg. Class A Full Service Rental Rate Dimensional Place; Photo courtesy of CoStar

SOUTHWEST UPDATE

Several years ago, the Southwest market experienced a significant amount of leasing activity. In fact, in 2012, there was nearly twice as much leasing activity in the Southwest submarket than there was in 20161. The activity of five to seven years ago is now being reflected in the current state of the Southwest submarket. Large tenants who signed new leases or renewals then – such as St. Jude (now Abbott Laboratories) at Dimensional Place and SHI Corporation and CSID at Barton Skyway – are receiving much of the attention as they are coming up on their expirations in the next 12-24 months.

If a large tenant is coming up on the end of its lease, and opts to proceed cautiously before occupying a new building, the tenant may opt to take one of the large subleases in order to take advantage of the lower rate, while waiting to see how the overall market shakes out in the coming quarters.

With so many large blocks of space rolling in the quarters ahead, developers are licking their chops at the prospect of landing one of these major Southwest tenants. Development sites such as Garza Ranch by Brandywine, Seven Oaks by Riverside Resources, Uplands Phase II by Drawbridge Realty (124,641 sf with permit in hand), The Terrace III-V by Claydesta LLP and others are all vying for one of these groups to potentially kick-off their building.

Due to these limiting factors at the end of 2016, the lack of activity as of late is not indicative of a slowing submarket. Rather, tenants still find the Southwest submarket as one of the most desirable in the city, making these past few months feel more like the calm before the storm of new leasing activity ahead of us.

Meanwhile, most of the largest contiguous available spaces are subleases, including AMD’s space at The Summit at Lantana (58,480 sf available January 2017 plus 59,406 sf available July 2017), Apple’s space at CityView (94,198 sf) and YETI’s subleases at Uplands Corporate Center Phase I (92,781 sf) and Lantana Ridge (58,300 sf available October 2017). The Summit at Lantana Building 3; Photo courtesy of CoStar

SOUTHWEST UPDATE

As tenants continue to grow and with costs continuing to rapidly rise in the CBD, particularly with regard to operating expenses, it could be only a matter of time before downtown tenants begin to flock to the nearby southwest market to save

substantial dollars and get in on the amenity-rich new construction and more affordable parking.

Source: CoStar

Lake Travis

McNeil

Arboretum

Domain

FAR SW West Lake Hills

Barton Creek

Tarrytown

Austin

Lost Creek

NEAR SW

Sunset Valley

ABIA

SOUTHWEST MICROMARKETS

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

2015 Q1

7,100,750

399,919

188,613

-21,519

8.29%

$36.76

2015 Q2

7,782,464

428,605

213,812

627,829

8.25%

$37.35

2015 Q3

7,949,325

353,625

264,345

191,308

7.77%

$37.41

2015 Q4

8,158,872

634,326

246,492

-53,301

10.80%

$37.94

2016 Q1

8,161,143

680,309

195,638

7,142

10.73%

$38.47

2016 Q2

8,161,143

696,616

213,561

-34,230

11.15%

$38.65

2016 Q3

8,153,822

611,657

271,868

19,331

10.84%

$38.88

2016 Q4

8,153,822

550,953

226,773

105,799

9.54%

$39.52

*Absorption includes sublease space

15%

800

12%

600

400

200

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

800

95%

600

93%

400

91%

200

89%

87%

(200)

Di rect & Subleas e Vacancy Rate

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

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

$34

$32

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

Di rect & Subleas e Vacancy Rate

BEE CAVE

WEST LAKE HILLS

4 10 12

BARTON CREEK UT SO

T ES HW

9 8

5 3 11 1

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

Direct Vacant SF

Sublease Available SF

Total Available SF

Encino Trace II

59,151

Wild Basin II

44,748

12,277

57,025

The Summit at Lantana Bldg 3

52,934

Las Cimas II

23,096

26,565

49,661

Rialto II

36,421

Las Cimas III

18,089

14,374

32,463

Plaza on the Lake I

Barton Oaks Plaza V

Rollingwood Center I

Las Cimas IV

The Park on Barton Creek 1

Cityview Center

8,936

21,596

30,532

28,784

27,276

11,408

14,373

25,781

24,520

24,478

SOUTHWEST AUSTIN OFFICE DEVELOPMENT Building

Total SF

Estimated Delivery

Status

Galleria Oaks I & II

147,928

50%

2017 Q2

Under Construction

Lantana Ridge I & II

175,000

100%

2017 Q2

Under Construction

Walsh Tarlton Overlook

55,500

2017 Q2

Under Construction

The Overlook at Barton Creek

53,091

2017 Q3

Under Construction

Regency Park

90,000

Planned

Rollingwood Center III

107,000

Planned

Seven Oaks I & II

129,604

Planned

The Backyard - Buildings B, J, & H

171,450

Planned

The Terrace 3

203,130

Planned

The Terrace 4

285,663

Planned

The Terrace 5

218,809

Planned

Upland Corporate Center Phase II

123,525

Planned

Percent Preleased

Under Construction

WEST LAKE HILLS BEE CAVE

BARTON CREEK UT SO T ES HW

3 2

10 11

12 5

AVAILABILITY SUMMARY SOUTHWEST CLASS A 5

8,717

4 3 2,500 SF

NSW

25,137 SF

3,647 SF

4 2,400 SF

2 1

3,480 SF

NSW

9,225

3,038 SF

NSW

Barton Oaks Plaza I 901 S Mopac Expy

Barton Oaks Plaza II 901 S Mopac Expy

Barton Oaks Plaza III 901 S Mopac Expy

Barton Oaks Plaza IV 901 S Mopac Expy

Barton Oaks Plaza V 901 S Mopac Expy

One Barton Skyway 1501 S Mopac Expy

5 Floors 99,404 SF 97% Leased $29.50 NNN $16.04 Op/Ex $45.54 Gross

5 Floors 116,448 SF 87% Leased $27.00 NNN $15.46 Op/Ex $42.46 Gross

5 Floors 121,467 SF 90% Leased $27.00 NNN $14.71 Op/Ex $41.71 Gross

5 Floors 112,000 SF 100% Leased $27.00 NNN $15.45 Op/Ex $42.45 Gross

5 Floors 119,549 SF 76% Leased $27.00 NNN $14.86 Op/Ex $41.86 Gross

4 Floors 195,324 SF 100% Leased $26.50-$27.50 NNN $15.09 Op/Ex $41.59-$42.59 Gross

5 4

42,369 SF

13,280 SF

16,782 SF

19,402 SF 2,433 SF

FSW

6,726 SF

FSW

3,694 SF 10,852 SF

3,021 SF

4,745 SF

15,047 SF

14,373 SF

FSW

Las Cimas I 804 Las Cimas Pkwy

Las Cimas II 807 Las Cimas Pkwy

Las Cimas III 805 Las Cimas Pkwy

Las Cimas IV 900 S Capital of Tx Hwy

4 floors 161,606 SF 100% Leased $24.50 NNN $13.83 Op/Ex $38.33 Gross

4 floors 158,137 SF 63% Leased $24.50 NNN $13.70 Op/Ex $38.20 Gross

3 Floors 85,000 SF 92% Leased $23.50 NNN $15.37 Op/Ex $38.87 Gross

4 Floors 156,682 SF 85% Leased $26.50 NNN $14.61 Op/Ex $41.11 Gross

4 Floors 156,682 SF 88% Leased $26.50 NNN $14.89 Op/Ex $41.39 Gross

5 Floors 138,008 SF 92% Leased $27.00 NNN $15.58 Op/Ex $42.58 Gross

27,276 SF

NSW

Rollingwood Center II 2500 Bee Caves Rd

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

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

FSW

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

14,514 SF

FSW

3700 San Clemente 3700 N Capital of Tx Hwy 5 Floors 249,870 SF 94% Leased $27.00 NNN $13.81 Op/Ex $40.81 Gross

11,038 SF

4 3

Rollingwood Center I 2500 Bee Caves Rd

5 11,874 SF

FSW

Encino Trace II 5707 Southwest Pkwy

3 52,934 SF

FSW

3900 San Clemente 3900 N Capital of Tx Hwy 5 Floors 251,146 SF 91% Leased $26.00 NNN $14.31 Op/Ex $40.31 Gross

Southwest Submarket

Availability Summary 41

2 6,663 SF

Encino Trace I 5707 Southwest Pkwy

FSW

The Summit at Lantana Bldg 300 7171 Southwest Pkwy 4 Floors 217,077 SF 76% Leased $25.00 NNN $14.59 Op/Ex $39.59 Gross

7 6

8,100 SF

NSW

4,658 SF

NSW

FSW

3,694

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 96% Leased $26.50-$27.50 NNN $15.35 Op/Ex $41.85-$42.85 Gross

4 Floors 173,302 SF 97% Leased $26.50-$27.50 NNN $15.09 Op/Ex $41.59-$42.59 Gross

5 Floors 222,580 SF 100% Leased $26.50-$27.50 NNN $14.35 Op/Ex $40.85-$41.85 Gross

7 floors 216,511 SF 100% Leased $27.00-$30.00 NNN $10.56 Op/Ex $37.56-$40.56 Gross

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

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

21,262 SF

3,258 SF

2,568 SF

20,228 SF

8,295 SF

18,549 SF

NSW

Mira Vista 2705 Bee Caves Rd

NSW

The Park on Barton Creek One 3711 S Mopac Expy 5 floors 102,608 SF 76% Leased $26.00 NNN $13.87 Op/Ex $39.87 Gross

3 Floors 121,147 SF 93% Leased $27.50 NNN $15.28 Op/Ex $42.78 Gross

5,661 SF

1,806 SF

21,596 SF

8,936 SF

FSW

The Park on Barton Creek Two 3711 S Mopac Expy 5 floors 102,587 SF 100% Leased $26.00 NNN $14.02 Op/Ex $40.02 Gross

FSW

5000 Plaza on the Lake 5000 Plaza on the Lake Dr. 3 Floors 119,463 SF 94% Leased $27.00-$28.00 NNN $17.10 Op/Ex $44.10-$45.10 Gross

Plaza on the Lake I 5001 Plaza on the Lake Dr. 3 Floors 122,530 SF 93% Leased $28.50 NNN $15.57 Op/Ex $44.07 Gross

5,725 SF

8,456 SF

3,493 SF

2,221 SF

2,329 SF

1,281 SF

FSW

The Summit at Lantana Bldg 400 7171 Southwest Pkwy 4 Floors 220,218 SF 100% Leased $25.00 NNN $14.59 Op/Ex $39.59 Gross

NSW

15,712 SF

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 97% Leased $27.00 NNN $15.99 Op/Ex $42.99 Gross

5 Floors 114,635 SF 86% Leased $27.00 NNN $16.35 Op/Ex $43.35 Gross

6 Floors 196,717 SF 97% Leased $30.00 NNN $16.44 Op/Ex $46.44 Gross

6 Floors 196,215 SF 98% Leased $30.00 NNN $16.41 Op/Ex $46.41 Gross

Austin, TX Q4 2016 Class A Office Space

To find out more, visit:

FSW

Plaza on the Lake II 4801 Plaza on the Lake Dr. 3 Floors 156,000 SF 100% Leased $28.50 NNN $15.57 Op/Ex $44.07 Gross

SUBLEASE SPACE AVAILABLE SPACE

aquilacommercial.com/reports

TheAppendix Competitive Sets

45-56

Central Business District

Arboretum/Domain

Shepherd Mountain/2222

Far Northwest

Near Southwest

Far Southwest

Longterm Performance of Submarkets

Longterm Performance: CBD vs. Suburban

CBD Overall Performance

Southwest Overall Performance

Northwest Overall Performance

The AQUILA Methodology

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

20,132 ↑

0↓

$40.00

$22.69

300 West 6th

454,225

31,424 ↓

0↓

$38.00

$25.78 ↑

301 Congress

418,338

37,360 ↓

14,925 ↑

$35.00

$22.52 ↑

400 West 15th

281,196

12,243 ↑

6,858

$28.00

$17.47

501 Congress

122,551

17,400

20,396

$35.00

$22.53

515 Congress

263,058

15,078 ↑

$34.00

$18.05

5th + Colorado

179,000

4,965 ↓

$40.00

$17.39 ↑

600 Congress Ave.

503,951

0↓

22,644 ↑

$35.00

$20.86 ↑

816 Congress

434,081

16,845 ↑

3,325

$35.00 ↑

$17.59

Austin Centre

326,335

32,381 ↑

$28.50

$19.92 ↑

Capitol Center

164,044

24,301 ↑

1,616

$30.00

$19.70

Capitol Tower

172,837

10,580

$31.00

$16.52

Chase Tower

389,503

3,663 ↑

0↓

$37.00

$19.85

Colorado Tower

373,334

$34.00

$16.83

Frost Bank Tower

535,078

20,519 ↓

0↓

$43.00 ↑

$26.38 ↑

IBC Bank Plaza

194,749

$35.00

$23.50 ↑

Lavaca Plaza

118,635

6,714

$32.50

$22.65 ↑

Littlefield Building

109,779

19,907

0↓

$32.00 ↓

$15.92 ↓

One Congress Plaza

518,385

44,849 ↑

4,797

$37.00 ↓

$18.15 ↑

San Jacinto Center

406,279

7,306

$36.00

$23.73 ↑

Scarbrough Building

130,789

19,546 ↑

6,615

$35.00

$16.59 ↓

Seaholm

143,151

$28.00

$12.00

Building Name

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

2015 Q1

6,553,774

447,850

71,595

126,043

7.93%

$34.46

2015 Q2

6,742,789

389,248

63,891

255,321

6.72%

$34.77

2015 Q3

6,719,697

407,169

76,078

-53,200

7.19%

$34.38

2015 Q4

6,938,611

322,314

93,200

286,647

5.99%

$34.82

2016 Q1

8,253,506

617,666

88,016

1,024,727

8.55%

$35.76

2016 Q2

8,253,506

687,546

100,846

-82,710

9.55%

$36.09

2016 Q3

8,253,506

664,105

94,513

29,774

9.19%

$36.42

2016 Q4

8,253,506

621,665

68,648

68,305

8.36%

$36.66

*Absorption includes sublease space

15%

800

12%

600

400

200

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

1,200

99%

1,000

97%

800

95%

600

93%

400

91%

200

89%

87%

(200)

Di rect & Subleas e Vacancy Rate

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

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

$37

11%

$36

$35

$34

$33

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

Di rect & Subleas e Vacancy Rate

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

1,645

$17.50

$11.81 ↑

9500 Arboretum

182,331

$22.00

$13.51

Arboretum Atrium

90,280

8,222

0↓

$21.00

$15.48 ↑

Arboretum Plaza One

146,347

4,998

$28.00

$15.53

Arboretum Plaza Two

98,828

$28.00

$15.53

Arboretum Point

150,033

$23.00

$13.44

Atrium Office Centre

199,858

32,952

$18.50

$12.08 ↑

Austin Oaks

445,240

60,338 ↓

1,248 ↓

$19.00

$12.04 ↑

Balcones Centre

74,876

5,894 ↑

$26.00

$10.67

Building Name

Braker Pointe I

77,454

0↓

$22.50

$14.47 ↑

Braker Pointe II

103,114

1,953

5,162

$22.50

$13.81 ↑

Braker Pointe III

196,380

131,404 ↓

$25.00

$12.84

Colina West

69,299

3,666 ↑

$20.50

$13.30 ↑

Domain 1

124,571

$31.00

$11.00

Domain 2

143,331

$31.00

$11.00

Domain 3

179,006

33,390

$27.00

$11.90

Domain 4

152,012

$27.00 ↑

$11.16

Domain 5

78,987

$26.00

$11.00

Domain 7

221,973

0↓

$29.00

$12.00

Domain Gateway

173,962

$28.00

$15.39 ↑

Great Hills Corporate Center I

59,228

10,216 ↓

$18.50

$11.39

Great Hills Corporate Center II

60,429

$18.00

$11.39

Great Hills Corporate Center III

56,422

$18.50

$11.39

Great Hills Plaza

139,252

11,318 ↑

$21.00 ↓

$12.77 ↓

Greystone Plaza

78,248

2,184 ↓

$20.00

$13.88 ↑

Heritage Plaza

74,736

11,606 ↑

$29.00

$12.49

IBM Broadmoor Campus

1,111,734

144,249

$24.00

$11.00

Kaleido I & II

73,149

10,742 ↑

1,989 ↑

$18.50

$11.67 ↑

Lakeview Plaza

120,559

9,276

15,344 ↓

$23.00 ↑

$13.10

Northpoint Centre I & II

151,126

12,069 ↑

$24.00 ↑

$12.66 ↑

COMPETITIVE SET

Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

Offices at the Domain Bldg 1

92,955

$27.50

$15.49

Offices at the Domain Bldg 2

75,509

$27.50

$14.75

One Far West Plaza

70,642

276 ↓

$18.50 ↑

$12.03 ↓

Park North I & II

133,568

$19.50

$11.83

Plaza 7000

155,076

1,712

0↓

$26.00

$13.82

Prominent Pointe I

150,376

25,204 ↓

0↓

$24.50

$14.83 ↑

Prominent Pointe II

102,567

4,917 ↓

8,409

$24.50

$15.88 ↑

Quarry Lake Business Center

117,512

$23.00 ↑

$13.75

Quarry Oaks I

165,435

$27.00

$11.82

Quarry Oaks II

126,000

$27.00

$11.48

Quarry Oaks III

137,615

$28.00

$12.00

Reunion Park

118,142

18,962

$19.00

$11.16

Stone Creek I

76,860

$24.00

$10.53 ↓

Stone Creek II

162,723

$24.00

$13.29 ↓

Building Name

Stone Creek Park

77,185

$20.00

$13.45

Stonebridge Plaza I

193,200

2,695 ↑

$28.00

$14.30 ↓

Stonebridge Plaza II

192,864

10,986

$28.00

$14.58 ↓

Stratum Executive Center Bldg A

61,000

$22.00

$14.60 ↑

Stratum Executive Center Bldg B

61,000

4,408 ↑

$22.00

$14.60 ↑

Stratum Executive Center Bldg C

61,000

3,099

$22.00

$14.60 ↑

Stratum Executive Center Bldg D

61,000

16,775 ↑

$22.00

$14.60 ↑

The Campus at Arboretum 1

60,059

$23.50

$15.02 ↑

The Campus at Arboretum 2

33,135

0↓

$23.50

$14.64 ↑

The Campus at Arboretum 3

32,765

$23.50

$14.92 ↑

The Campus at Arboretum 4

85,916

10,066

$23.50

$14.17

The Campus at Arboretum 5

105,000

$23.50

$14.57 ↑

The Park at 8300 N. MoPac

93,317

38,869

$23.00

$14.01

UFCU Plaza

246,869

5,607 ↓

$22.00

$13.12 ↓

Westech 360 Bldgs 1-4

175,529

6,225

3,106 ↑

$21.00

$13.79 ↑

Westpark Office 1-4

97,034

9,132 ↑

$19.00 ↑

$10.63 ↓

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

2015 Q1

2,690,750

207,229

179,538

132,562

14.37%

$34.17

2015 Q2

2,690,750

181,798

152,245

52,724

12.41%

$34.45

2015 Q3

2,690,750

193,874

135,899

4,270

12.26%

$34.55

2015 Q4

2,690,835

173,907

79,703

76,248

9.42%

$35.16

2016 Q1

2,690,835

266,741

97,821

-110,952

13.55%

$36.11

2016 Q2

2,690,835

293,144

137,974

-66,556

16.02%

$36.16

2016 Q3

2,690,835

304,989

137,636

-11,507

16.45%

$36.65

2016 Q4

2,690,835

279,953

42,875

119,797

12.00%

$36.66

*Absorption includes sublease space

525

18%

350

12%

175

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

160

24%

$36

18%

$34

12%

$32

$30

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES

91%

120

89%

87%

85%

83%

(40)

81%

(80)

79%

(120)

77%

(160)

Di rect & Subleas e Vacancy Rate

$38

Absorption (Thousands of SF)

24%

Vacancy Rate

Availability (Thousands of SF)

700

NET ABSORPTION

2015 Q1

2015 Q2

2015 Q3

Net Abs orption*

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

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

$23.50

$13.31 ↓

Bridgepoint Plaza II

72,640

11,303 ↑

$23.50

$13.31 ↓

Bridgepoint Square 1

84,692

5,016 ↓

$25.00

$13.54 ↑

Bridgepoint Square 2

92,459

6,636 ↑

0↓

$25.00

$13.22

Bridgepoint Square 3

78,352

$25.00

$13.22

Bridgepoint Square 4

109,175

15,330

10,328 ↑

$25.00

$13.22

Bridgepoint Square 5

76,793

5,646

0↓

$25.00

$13.22

Champion Office Park I & II

230,000

$26.50

$11.00

Four Points Centre I & II

192,396

$23.50

$14.09 ↑

Ladera Bend 1

56,466

$22.00

$16.34

Ladera Bend 2

45,732

$22.00

$14.10

Ladera Bend 3

56,196

0↓

$22.00

$14.67

Lakewood Center I

47,389

45,620 ↑

10,182 ↓

$21.00 ↓

$15.19 ↑

Lakewood Center II

44,611

$21.00 ↓

$15.19 ↑

Lakewood on the Park B

102,086

29,324 ↓

$21.50

$12.51

Lakewood on the Park C

78,596

12,808

$21.50

$12.51

Millennium Building

125,612

6,290

$24.00

$12.58

Park Centre Bldg 1

89,822

24,305 ↑

3,279

$17.00 ↓

$11.82 ↓

Park Centre Bldg 2

35,095

18,730

$17.00 ↓

$11.82 ↓

Park Centre Bldg 3

78,270

45,711

$17.00 ↓

$11.82 ↓

Reserve at Bull Creek A

43,867

11,365

2,424 ↑

$20.00

$13.17 ↑

Reserve at Bull Creek B

43,713

0↓

$20.00

$13.17 ↑

Reserve at Bull Creek C

43,695

0↓

$20.00

$13.17 ↑

River Place Corporate Park I

76,529

$23.00

$14.46 ↓

River Place Corporate Park II

114,491

21,306 ↑

16,662

$23.00

$13.72 ↓

River Place Corporate Park III

113,465

0↓

$23.00

$14.13 ↑

River Place Corporate Park IV

87,639

8,601

$23.00

$14.43 ↑

River Place Corporate Park V

67,601

$23.00

$14.83 ↑

River Place Corporate Park VI

62,037

$23.00

$14.64 ↑

River Place Corporate Park VII

69,119

$23.00

$13.72 ↓

Shepherd Mountain Plaza

100,937

1,247 ↑

0↓

$38.00

$12.39

Stone Cliff

66,027

10,715

$18.00

$13.66 ↑

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

2015 Q1

3,687,385

337,115

41,201

61,178

10.26%

$30.93

2015 Q2

3,687,385

326,153

67,899

-15,736

10.69%

$31.66

2015 Q3

4,224,285

852,792

75,271

2,889

21.97%

$31.12

2015 Q4

4,526,637

964,028

62,303

204,084

22.67%

$32.36

2016 Q1

4,198,522

537,928

209,659

-49,371

17.81%

$33.30

2016 Q2

4,198,522

490,723

186,650

70,214

16.13%

$33.73

2016 Q3

4,198,522

394,663

251,041

31,669

15.38%

$33.56

2016 Q4

4,198,522

336,715

182,772

126,217

12.37%

$34.09

*Absorption includes sublease space

24%

1,000

20%

800

16%

600

12%

400

200

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

$34

18%

$32

12%

$30

$28

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES 24%

98%

200

91%

100

84%

77%

(100)

Di rect & Subleas e Vacancy Rate

$36

300

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Occupancy Rate

70%

Occupancy Rate

1,200

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

COMPETITIVE SET

FAR NORTHWEST MICROMARKET COMPETITIVE SET BUILDINGS Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

Amber Oaks A

78,164

19,124

$19.50

$11.67

Amber Oaks B

44,184

$19.50

$8.30

Amber Oaks C

44,184

$19.50

$8.60

Amber Oaks D

28,733

$19.50

$10.45

Building Name

Amber Oaks E

63,111

$19.50

$8.03

Amber Oaks F

79,732

0↓

$19.50

$11.64

Amber Oaks G

106,455

8,293 ↑

4,924 ↑

$19.50

$11.68 ↑

Amber Oaks H

101,045

$19.50

$10.93

Amber Oaks I

50,313

10,828

$19.50

$13.03

Amber Oaks J

50,111

21,311 ↑

33,147

$19.50

$12.14

Aspen Lake One

204,940

36,038 ↑

$22.00

$13.97 ↑

Aspen Lake Two

129,000

$24.50

$10.00

Crossings at Lakeline I

114,726

$22.50

$12.61 ↑

Crossings at Lakeline II

118,046

5,129 ↓

$22.50

$11.73 ↓

Paloma Ridge A & B

212,400

184,469

$19.50 ↑

$9.50

Parmer Business Park 7, 8, 9

123,731

$18.50

$5.60

Parmer Business Park D, E, F

107,283

$18.50

$5.60

Pecan Park I

136,444

0↓

$22.50

$11.92

Pecan Park II

136,245

$19.50

$10.72 ↑

Research Park Place 7

125,701

1,393 ↑

40,279

$23.00

$13.20

Research Park Place 8

125,700

33,518

$23.00

$13.20

Research Park Plaza I

135,541

7,641

$23.00

$14.98

Research Park Plaza II

131,027

$23.00

$14.98

Research Park Plaza III

173,530

$24.00

$15.90 ↑

Research Park Plaza IV

184,114

3,355

0↓

$24.00

$15.90 ↑

Research Park Plaza V

172,854

4,754

$24.00

$11.06

Riata Corporate Park Bldg 2

63,372

7,054

21,148 ↑

$23.00 ↑

$13.65

Riata Corporate Park Bldg 3

63,849

$23.00 ↑

$13.65

Riata Corporate Park Bldg 4

93,737

10,445

$23.00 ↑

$13.65

Riata Corporate Park Bldg 5

93,828

6,215

$23.00 ↑

$13.65

Riata Corporate Park Bldg 6

93,835

$23.00 ↑

$13.65

Riata Corporate Park Bldg 7

92,719

$23.00 ↑

$13.65

Riata Corporate Park Bldg 8

93,718

45,457

$23.00 ↑

$13.65

Riata Corporate Park Bldg 9

92,973

$23.00 ↑

$13.65

Riata Crossing Bldg 1

81,775

N/A

Riata Crossing Bldg 2

114,906

N/A

Riata Crossing Bldg 3

81,229

N/A

Riata Crossing Bldg 4

79,465

N/A

Tower of the Hills/Tower Point

175,802

13,186 ↓

1,779 ↑

$21.50 ↑

$13.52 ↑

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

2015 Q1

2,711,340

143,863

125,110

12,181

9.92%

$38.69

2015 Q2

2,925,937

110,815

101,710

271,045

7.26%

$38.96

2015 Q3

2,925,937

105,532

175,528

-68,535

9.61%

$39.31

2015 Q4

2,925,937

149,170

165,733

-33,843

10.76%

$40.02

2016 Q1

2,926,017

137,847

113,003

64,133

8.57%

$40.53

2016 Q2

2,926,017

185,286

98,583

-33,019

9.70%

$40.93

2016 Q3

2,926,017

198,831

117,508

-32,470

10.81%

$41.35

2016 Q4

2,926,017

166,865

49,953

99,521

7.41%

$42.16

*Absorption includes sublease space

16%

300

12%

200

100

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

Di rect & Subleas e Vacancy Rate

$41

15%

$39

12%

$37

$35

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES 18%

100%

200

96%

100

92%

88%

(100)

$43

300

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

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

Sublease Available SF

Asking Rental Rate

Estimated OpEx

Barton Creek Plaza I

72,974

9,875

$24.00

$14.81 ↑

Barton Creek Plaza II

64,718

0↓

$24.00

$14.31 ↑

Barton Creek Plaza III

64,842

9,432

$24.00

$14.11 ↑

Barton Oaks Plaza I

99,404

2,500

0↓

$29.50 ↑

$16.04 ↑

Barton Oaks Plaza II

116,448

14,597 ↑

0↓

$27.00

$15.46 ↓

Barton Oaks Plaza III

121,467

12,263 ↑

$27.00

$14.71 ↑

Barton Oaks Plaza IV

112,000

$27.00

$15.45 ↑

Barton Oaks Plaza V

119,549

28,784

$27.00

$14.86 ↑

Barton Skyway I

195,324

$27.50 ↑

$15.09 ↑

Barton Skyway II

195,639

8,100 ↑

0↓

$27.50 ↑

$15.35 ↑

Barton Skyway III

173,302

4,658 ↓

$27.50 ↑

$15.09 ↑

Barton Skyway IV

222,580

$27.50 ↑

$14.35 ↑

Centre I

39,903

2,710 ↓

$20.50

$12.75 ↑

Centre II

54,610

11,083

$19.50

$12.47

Mira Vista

121,147

8,295 ↑

2,568 ↓

$27.50

$15.28 ↑

Overlook at Gaines Ranch

50,725

10,949

$26.50

$15.83 ↑

Rollingwood Center I & II

214,587

27,276 ↓

$30.00

$12.00

Spyglass Point

58,576

$22.00

$14.97 ↑

The Park on Barton Creek 1

102,608

24,520 ↑

$26.00

$13.87 ↓

The Park on Barton Creek 2

102,587

0↓

$26.00

$14.02 ↓

The Terrace 1

115,460

3,601 ↓

$27.00 ↑

$15.99

The Terrace 2

114,635

15,712 ↑

$26.50

$16.35 ↑

The Terrace 6

196,717

5,725 ↓

8,456

$30.00 ↑

$16.44 ↑

The Terrace 7

196,215

3,493 ↓

2,221 ↑

$30.00

$16.41 ↑

Building Name

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

2015 Q1

4,389,410

256,056

63,503

-33,700

7.28%

$35.57

2015 Q2

4,856,527

317,790

112,102

356,784

8.85%

$36.39

2015 Q3

5,023,388

248,093

88,817

259,843

6.71%

$36.31

2015 Q4

5,232,935

485,156

80,759

-19,458

10.81%

$36.75

2016 Q1

5,235,126

542,462

82,635

-56,991

11.94%

$37.28

2016 Q2

5,235,126

511,330

114,978

-1,211

11.96%

$37.34

2016 Q3

5,227,805

412,826

154,360

51,801

10.85%

$37.47

2016 Q4

5,227,805

384,088

176,820

6,278

10.73%

$38.00

*Absorption includes sublease space

15%

600

12%

450

300

150

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

Di rect & Subleas e Vacancy Rate

$38

12%

$36

$34

$32

$30

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY VS. RENTAL RATES 15%

96%

300

93%

150

90%

87%

(150)

$40

450

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Occupancy Rate

84%

Occupancy Rate

750

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

COMPETITIVE SET

FAR SOUTHWEST MICROMARKET COMPETITIVE SET BUILDINGS Net Rentable Area

Direct Vacant SF

Sublease Available SF

Asking Rental Rate

Estimated OpEx

3600 San Clemente Bldg B

90,267

7,238 ↑

$27.00

$15.63

3700 San Clemente

249,870

14,514 ↓

$27.00

$13.81 ↑

3900 San Clemente

251,146

18,242 ↓

$26.00

$14.31 ↑

5000 Plaza on the Lake

118,063

7,467 ↓

$28.00 ↑

$17.10 ↑

7000 West at Lantana 1 & 2

136,075

DND

Canyon at Wild Basin

74,580

11,162 ↑

$24.50

$12.33 ↑

Capital Ridge

216,511

$30.00

$10.56

Cielo Center

270,711

10,033 ↑

5,656

$20.50

$13.48 ↑

Cityview 1

46,702

$22.00

$13.96 ↑

Cityview 2

47,809

3,023 ↑

4,278 ↑

$22.00

$13.96 ↑

Cityview 3

48,044

$22.00

$13.96 ↑

Cityview Center

137,763

24,478

$26.00

$12.91 ↑

Crystal Mountain 1, 2 & 3

61,762

14,524 ↓

0↓

$25.50

$9.41

Dimensional Place I

220,000

$24.00

$12.18 ↓

Dimensional Place II

156,000

3,694 ↑

$24.00

$12.18 ↓

Encino Trace I

161,606

$24.50

$13.83 ↑

Encino Trace II

158,137

59,151 ↓

$24.50

$13.70 ↑

Escalade Bldg A

58,344

9,440

$22.00 ↑

$13.46

Escalade Bldg B

57,142

3,165 ↑

$22.00 ↑

$13.46

Lake Pointe II

42,933

5,489

$14.00

$10.09

Las Cimas I

85,000

6,726 ↑

$23.50

$15.37 ↑

Las Cimas II

156,682

23,096 ↑

26,565 ↓

$26.50

$14.61 ↓

Las Cimas III

156,682

18,089 ↑

14,374 ↑

$26.50

$14.89 ↑

Las Cimas IV

138,008

11,408 ↑

14,373

$27.00

$15.58 ↑

Lost Creek Point

73,026

7,040 ↑

$18.00

$12.61 ↑

Parkway at Oak Hill I & II

145,475

12,485 ↑

$24.00

$13.84

Plaza 290

63,163

5,331

3,120 ↑

$19.00

$12.50

Plaza on the Lake I

122,530

8,936

21,596

$28.50

$15.57 ↓

Plaza on the Lake II

111,166

$28.50

$15.57 ↑

Rialto I

77,755

13,521 ↓

$23.50

$13.52 ↑

Rialto II

77,732

36,421

$23.50

$13.52 ↑

The Enclave Bldgs 1-4

44,704

5,500

2,750

$19.00

$9.77 ↓

The Summit at Lantana Bldgs 1-5

865,832

52,934

$25.00

$14.59 ↑

Travis Oaks

123,434

4,110

0↓

$23.50

$13.53 ↑

Vista Ridge I

67,933

1,252 ↓

$19.00

$11.00

Westlake Place

61,184

2,987 ↓

$20.00

$13.39

Wild Basin Atrium Bldg A & B

118,910

6,859

$18.00

$9.40

Wild Basin I

60,498

2,856

$19.50

$12.56 ↑

Wild Basin II

74,626

44,748 ↑

12,277

$19.50

$12.14 ↑

Building Name

LONG TERM PERFORMANCE OF SUBMARKETS Numbers based on CBRE statistics.

20%

15%

10%

Citywide Sublease Availability

40%

32%

24%

16%

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

Southwes t

15%

600

10%

300

CBD Dire ct Availability CBD Vacancy Rate

Northwest

2,500

30%

2,000

24%

1,500

18%

1,000

12%

500

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%

90%

85%

80%

75%

-1

70%

-2

65%

Citywide

CBD

CBD Sublease Availability Citywide Vacancy Rate

SOUTHWEST AVAILABLE SF VS. VACANCY RATE

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

$55

CBD

20%

900

Northwest Sublease Availabi lity Citywide Vacancy Rate

CITYWIDE AVERAGE CLASS A ASKING RATES

Full Service Rental Rate

Direct & Sublease Vacancy Rate

Availability (Millions of SF)

NORTHWEST AVAILABLE SF VS. VACANCY RATE

Northwest Direct Availability Northwest Vacancy Rate

25%

1,200

Citywide Vacancy Rate

Availability (Thousands of SF)

Citywide Direct Availability

30%

1,500

Direct & Sublease Vacancy Rate

1,800

Direct & Sublease Vacancy Rate

25%

Direct & Sublease Occupancy Rate

30%

Availability (Thousands of SF)

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%

CBD

Su burban

CBD Vacancy Rate

Citywide

30%

25%

20%

15%

10%

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

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

2015 Q1

9,768,770

1,135,835

139,236

12.81%

$43.83

2015 Q2

9,809,755

870,240

291,638

10.20%

$41.90

2015 Q3

9,809,755

672,222

135,085

7.83%

$44.17

2015 Q4

9,732,884

631,228

83,341

7.07%

$43.64

2016 Q1

9,732,884

565,112

88,208

5.94%

$47.52

2016 Q2

9,954,349

706,027

25,998

7.80%

$47.93

2016 Q3

9,953,924

618,517

111,343

6.70%

$50.89

2016 Q4

9,946,701

727,763

-106,896

7.80%

*Absorption includes sublease space

NET ABSORPTION

12%

900

600

300

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

300

VACANCY RATES VS. RENTAL RATES

20%

$48

16%

$46

12%

$44

$42

$40

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Vacancy Rate

Rental Rate

24%

$50

96%

200

Di rect & Subleas e Vacancy Rate

$52

99%

250

Di rect & Subleas e Vacancy Rate

150

93%

100

90%

50 0

87%

(50)

84%

(100) (150)

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

81%

Di rect & Subleas e Occupancy Rate

Occupancy Rate

15%

1,200

Absorption (Thousands of SF)

1,500

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

2015 Q1

$51.06 Numbers based on CBRE statistics.

AUSTIN CBD OFFICE RENTAL RATE PROJECTIONS $60

3% Job Growth

$55 $50

Full Service Rental Rates

1% Job Growth $45 $40 $35 $30 $25 $20 $15 2004

2005

2006

2007

2008

2009

Historic Rental Rate

2010

2011

2012

2013

3% Job Growth

AQUILA Model

2014

2015

2016

2017

2018

1% Job Growth

AUSTIN CBD OFFICE VACANCY RATE PROJECTIONS 35%

11.5

801 Barton Springs Westview

11.0

Shoal Creek Walk

30%

500 W 2nd

Total Vacancy Rate

10.0 20% 9.5 15% 9.0 10%

1% Job Growth

Market Size (Millions of SF)

10.5

25%

8.5

8.0

3% Job Growth 0% 2004

2005

2006

2007 Market Size

2008

2009

2010

Historic Vacancy Rate

2011

2012

AQUILA Model

2013

2014

2015

3% Job Growth

2016

2017

2018

7.5

1% Job Growth

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

2015 Q1

17,154,310

1,879,975

138,145

11.65%

$31.84

2015 Q2

17,269,310

1,819,734

180,936

11.56%

$32.44

2015 Q3

17,269,310

1,665,124

237,697

9.96%

$33.39

2015 Q4

17,535,625

1,283,335

311,312

8.99%

$33.83

2016 Q1

18,039,828

1,868,483

136,576

11.17%

$33.70

2016 Q2

18,114,632

1,788,996

167,959

10.60%

$33.72

2016 Q3

17,913,936

1,465,141

308,550

9.03%

$33.70

2016 Q4

17,912,626

1,429,468

10,335

8.94%

$33.67

*Absorption includes sublease space

Numbers based on CBRE statistics.

15%

2,000

12%

1,500

1,000

500

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

$34

13%

$32

10%

$30

$28

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY RATES VS. RENTAL RATES 16%

95%

450

93%

300

91%

150

89%

87%

(150)

Di rect & Subleas e Vacancy Rate

$36

600

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

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

2015

2014

2016

2017

2018

1% Job Growth

NORTHWEST SUBMARKET OFFICE VACANCY RATE PROJECTIONS 30%

24.0

MoPac Centre

Domain Tower

25%

20.0

20%

16.0

15%

12.0

1% Job Growth 10%

8.0

3% Job Growth

0% 2004

2005

2006

2007

Market Size

2008

2009

2010

Historic Vacancy Rate

2011

2012

AQUILA Model

2013

2014

2015

3% Job Growth

2016

2017

2018

Market Size (Millions of SF)

Total Vacancy Rate

Domain 8

4.0

0.0

1% Job Growth

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

2015 Q1

9,446,430

589,875

66,172

7.98%

$34.35

2015 Q2

10,109,725

1,070,609

21,626

12.21%

$33.76

2015 Q3

10,257,625

1,192,565

200,870

12.29%

$35.03

2015 Q4

10,484,922

769,552

131,055

9.80%

$35.85

2016 Q1

10,484,886

777,581

80,164

9.25%

$36.65

2016 Q2

10,484,886

985,849

-90,753

11.40%

$37.18

2016 Q3

10,484,922

789,995

101,770

10.40%

$38.05

2016 Q4

10,539,771

784,066

68,801

9.70%

$37.75

*Absorption includes sublease space

Numbers based on CBRE statistics.

15%

1,200

12%

900

600

300

2015 Q1

2015 Q2

Di rect Vacant SF

2015 Q3

2015 Q4

2016 Q1

2016 Q2

Su blease Avai lable SF

2016 Q3

2016 Q4

15% 12%

$36

$34

$32

$30

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Average Class A Full Service Rental Rate

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Vacancy Rate

Vacancy Rate

Rental Rate

VACANCY RATES VS. RENTAL RATES

$38

95%

200

93%

100

91%

89%

(100)

87%

(200)

Di rect & Subleas e Vacancy Rate

$40

300

2015 Q1

2015 Q2

Net Abs orption*

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Di rect & Subleas e Occupancy Rate

85%

Occupancy Rate

1,500

Absorption (Thousands of SF)

NET ABSORPTION

Vacancy Rate

Availability (Thousands of SF)

AVAILABLE SF VS. VACANCY RATE

SOUTHWEST SUBMARKET OFFICE RENTAL RATE PROJECTIONS $45

3% Job Growth $40

Full Service Rental Rates

1% Job Growth $35

$30

$25

$20

$15 2004

2005

2006

2007

2008

2009

Historic Rental Rate

2010

2011

2012

AQUILA Model

2013

2014

3% Job Growth

2015

2016

2017

2018

1% Job Growth

SOUTHWEST SUBMARKET OFFICE VACANCY RATE PROJECTIONS 25%

15.0

The Overlook at Barton Creek 12.0

Total Vacancy Rate

Lantana Ridge I & II Walsh Tarlton Overlook Galleria Oaks 1 & 2 15%

9.0

1% Job Growth

10%

3% Job Growth

0% 2004

2005

2006

2007 Market Size

2008

2009

2010

Historic Vacancy Rate

2011

2012

AQUILA Model

2013

2014 3% Job Growth

2015

2016

2017

2018

6.0

Market Size (Millions of SF)

20%

3.0

0.0

1% Job Growth

THE AQUILA

METHODOLOGY

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

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

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

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

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

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

YOUR

NOTES:

YOUR

NOTES:

1717 W. Sixth Street, Suite 400 Austin, Texas 78703 512 684-3800 aquilacommercial.com 1