2Q 2018 DFW Office Market Brief

Market Brief... Dallas/Fort Worth

OFFICE

2Q18 Property Pictured Above: Mallick Tower, 101 Summit Avenue, Fort Worth, Texas

DFW OFFICE MARKET BRIEF 2Q 2018

TABLE OF CONTENTS 1. DALLAS/FORT WORTH OFFICE TEAM AND SUBMARKETS

1 2 3

2. OVERALL DALLAS/FORT WORTH OFFICE MARKET

A. Facts and Figures

2. SUBMARKET INTELLIGENCE

A. Dallas Central Business District

B. Central Expressway C. Far North Dallas D. Fort Worth Central Business District E. Las Colinas F. LBJ G. Mid Cities H. North Fort Worth I. Preston Center J. Richardson/Plano K. Southwest Fort Worth L. Stemmons M. Uptown/Turtle Creek

1

DFW

HLC SUBMARKET COVERAGE

2

HLC DFW OFFICE MARKET EXPERTS

MATT CARTHEY

GEOFF SHELTON

DAVID CASON

HOLDEN LUNSFORD

JOHN DICKENSON

Partner, Managing Principal - Fort Worth mcarthey@hlfortworth.com 817.710.1111

Managing Principal - Fort Worth gshelton@hlfortworth.com 817.710.1113

Vice President - Fort Worth dcason@hlfortworth.com 817.810.9137

Partner, Managing Principal - Dallas holdenlunsford@hldallas.com 972.381.3218

Managing Principal - Dallas jdickenson@hldallas.com 972.421.1971

JAMES ENGELS

VIRGINIA KERRIGAN

BRANDON AVEDIKIAN

JAKE NEAL

MARSHALL MAYS

Market Director - Dallas jengels@hldallas.com 972.280.8307

Market Director - Dallas vkerrigan@hldallas.com 972.421.1961

Market Director - Dallas bavedikian@hldallas.com 972.280.8302

Market Associate jneal@hlfortworth.com 817.284.5555

Market Associate - Fort Worth mmays@hlfortworth.com 817.632.6150

DAN POND

DYLAN SHAPIRO

MASON PRITCHER

Market Associate - Dallas dpond@hldallas.com 972.380.3641

Market Analyst - Dallas dshapiro@hldallas.com 972.381.3219

Market Analyst - Dallas mpricher@hldallas.com 972.280.8320

3

NEW LISTING

2800 N DALLAS PARKWAY

2800 N Dallas Parkway: 87,595 SF Class A office building in Upper Tollway/West Plano Submarket. Owned by Bell Air Office, LLC.

4

3500 OAK LAWN

NEW LISTING

3500 Oak Lawn: 101,561 SF Class A office building in the Uptown/Turtle Creek Submarket. Owned by Westdale.

5

NEW LISTING

4131 NCX: 177,075 SF Class A office building in the Central Expressway Submarket. Owned by Westdale.

6

4131 NCX

4245 NCX

NEW LISTING

4245 NCX: 87,292 SF Class A office building in the Central Expressway Submarket. Owned by Westdale.

7

HLC DFW OFFICE MARKET EXPERTS

VACANCY - OVERALL DFW

CONSTRUCTION - OVERALL DFW 9,000,000

25.00%

8,000,000

19.40% 20.00%

17.60%

7,000,000 6,000,000

18.0% 15.00%

16.6%

5,000,000 4,000,000

10.00%

3,000,000 2,000,000

5.00%

1,000,000

1.40%

1.00%

0

0.00% Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Direct Vacancy

Q4 16

Q1 17

Q2 17

Q3 17

Sublet Vacancy

Q4 17

Q1 18

Q2 18

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Delivered Inventory

Total Vacancy

ABSORPTION - OVERALL DFW

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Under Construction

OVERVIEW - OVERALL DFW 1,600,000

20.0%

3,000,000

1,400,000

2,500,000 1,200,000

19.0%

1,000,000

2,000,000

800,000

1,500,000

600,000

18.0% 1,000,000

400,000 200,000

500,000

17.0%

0

0

(200,000) (400,000) Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

16.0%

Q2 18

(500,000) Q2 15

Total Net Absorption

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Q4 17

Deliveries

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

Market

Existing Inventory # Bldgs.

Total RBA

Vacancy Direct SF

Total SF

Vac. %

YTD Net Absorption

YTD Deliveries

Under Const. SF

Quoted Rates

Central Expressway

110

12,861,457

1,621,803

1,743,546

13.6%

(205,843)

0

38,848

$28.55

Dallas CBD

83

28,798,531

6,899,205

7,559,540

26.2%

307,132

261,400

163,025

$25.20

East Dallas

189

7,785,996

965,895

978,873

12.6%

(103,429)

30,000

360,710

$26.33

Far North Dallas

466

48,827,173

8,738,369

9,714,978

19.9%

(209,914)

689,299

918,655

$28.29

Fort Worth CBD

55

8,860,332

1,260,204

1,275,979

14.4%

130,798

280,489

0

$28.64

Las Colinas

288

34,651,756

5,323,226

6,431,306

18.6%

(376,233)

350,000

2,185,900

$25.17

LBJ Freeway

169

21,128,063

4,467,411

4,611,776

21.8%

69,284

16,800

0

$22.27

Lewisville/Denton

163

7,737,507

1,013,192

1,103,057

14.3%

132,972

0

355,703

$23.47

Mid-Cities

426

21,816,887

4,246,383

4,325,933

19.8%

225,261

58,400

426,970

$22.37

North Fort Worth

58

3,029,869

445,175

445,175

14.7%

45,915

25,000

339,000

$19.98

Northeast Fort Worth

50

3,582,183

1,536,838

1,536,838

42.9%

153,039

0

0

$21.32

Preston Center

50

4,725,709

569,843

610,103

12.9%

35,252

0

119,000

$39.97

Richardson/Plano

369

28,900,243

5,853,983

6,071,296

21.0%

230,679

249,514

444,000

$24.44

South Fort Worth

227

11,656,645

1,165,916

1,260,243

10.8%

(17,504)

129,497

104,920

$23.73

Southwest Dallas

88

3,643,819

338,274

338,274

9.3%

47,364

0

0

$18.26

Stemmons Freeway

116

12,816,334

3,240,104

3,284,139

25.6%

(96,384)

0

0

$16.89

Uptown/Turtle Creek

97

12,413,343

1,435,066

1,708,072

13.8%

(50,861)

130,000

1,178,292

$39.04

3,004

273,235,847

49,120,887

52,999,128

19.4%

317,528

2,220,399

6,635,023

Totals

$25.61 Source: CoStar Property®

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DALLAS CENTRALINTELLIGENCE BUSINESS DISTRICT SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

68,890

238,152

117,039

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

26.2%

26.5%

26.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

163,025 Delivered SF Quoted Rates $25.20

163,025

322,110

vs. Prev. Qtr

vs. 12 Mths Ago

261,400

92,237

vs. Prev. Qtr

vs. 12 Mths Ago

$25.34

$25.31

VITAL STATS 28.0%

600,000

400,000 26.0% 200,000

0 24.0% (200,000)

(400,000)

22.0% Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Leasing activity at the newly renovated St. Paul Place has taken off announcing seven new leases this past week, totaling 33,000 SF (12% of RBA). Owner, Quadrant Capital, finished their revamp of the building at the end of the 2017 and made CBRE the building’s leasing representative. Building renovations include an outdoor patio deck, conference center, tenant lounge and espresso bar.

• Power law firm Simon Greenstone Panatier PC, is moving their Dallas headquarters from One McKinney to Renaissance Tower this August. The 1.7M SF Dallas skyscraper recently received over $100 million in new financing for the building and has undergone renovations. The law firm joins a growing list of companies that have taken space in the revamped downtown area.

• Goldman Sachs has signed their lease and begun moving into their new regional office in Trammell Crow Center. Along with their new office opening in Richardson, Goldman Sach’s CEO has plans to hire over 400 employees. The financial services giant currently employs 2,000 workers in North Texas.

• Todd Interests and JP Morgan Asset Management have partnered for a new redevelopment plan of 18 buildings along Cesar Chavez Boulevard, Commerce and Jackson Streets in downtown. The multi-milliondollar project is set to break ground immediately and will be completed before year-end. The surrounding area will be re-branded as “East District.”

• The biggest redevelopment in downtown is closing in on a new deal for funding. The old First National Bank Tower has been under a $300 million renovation for the last few years since it was bought by California-based Drever Capital Management. The project will convert the space into retail, apartments and hotel rooms and be renamed the Drever.

TOP LEASE TRANSACTIONS • The Beck Group has signed a 81.7K SF lease in Thanksgiving Tower.

• The CMI Group has signed a 27.4K SF lease in 1700 Pacific.

• Sheppard Mullin Richter & Hampton LLP has signed a 25.9K SF sublease at Chase Tower.

• Maverick Capital has signed a 22K SF lease in 1900 Pearl.

• Bestow Inc. has signed a 10.3K SF lease in Saint Paul Place.

• PCORE Exploration & Production LLC has signed an 8.2K SF expansion in Chase Tower.

• Velo IT Group has signed a 6K SF lease in Saint Paul Place.

• Copperback Energy has signed a 4.3K SF lease in Saint Paul Place.

• Haas Petroleum Engineering Services has signed a 4.2K SF lease in Saint Paul Place.

• Arup has signed a 3.4K SF lease in Saint Paul Place.

• Posadas USA has signed a 3.2K SF lease in 1700 Pacific.

NEW DEVELOPMENTS • The Luminary/401 N Houston Street – 102,315 SF • The Drever /140 Elm Street – 60,710 SF LARGE EXISTING VACANCIES • Thanksgiving Tower/1601 Elm Street – 376,547 SF • Bank of America Plaza/901 Main Street – 314,729 SF • Fountain Place/1445 Ross Avenue – 295,918 SF • 1700 Pacific/1700 Pacific Avenue – 236,493 SF • Ross Tower/500 N Akard Street – 172,046 SF • Comerica Bank Tower/1717 Main Street – 153,745 SF

9

CENTRAL INTELLIGENCE EXPRESSWAY SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

114,533

(320,376)

9,995

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

13.6%

14.4%

11.8%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$28.07

$26.85

38,848 Delivered SF Quoted Rates $28.55

VITAL STATS 20.0%

400,000

18.0%

300,000

16.0% 200,000 14.0% 100,000

12.0% 10.0%

0

8.0%

(100,000)

6.0% (200,000) 4.0% (300,000)

2.0% 0.0%

(400,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Houston-based Triten Real Estate, owner of the 225,193 SF 6060 at The Crossing office building, has filed plans with the city to build apartments and retail on undeveloped portions of the site.

• GlenStar Properties and USAA Real Estate have spent more than a year working on plans for the reboot of the 14-acre Energy Square complex at North Central Expressway and University Boulevard. The four-building office and retail complex is getting a $50 million-plus redo that won’t be finished until the second half of 2019. The project includes restoration of the landmark Meadows Building, one of Dallas’ first “suburban” office towers.

TOP LEASE TRANSACTIONS • Aspen Health has signed a 6.5K SF lease in Rambler Park.

• Eckard Global LLC has signed a 3.6K SF lease in Building 2 at 1301 Central Expressway.

DEALS IN THE MARKET • Rambler Park/7557 Ramber Road – 310,771 SF Class A office building

• Meadow Park Tower/10440 N Central Expressway – 278,164 SF Class A office building • One Glenn Lakes/8140 Walnut Hill Lane – 149,618 SF Class A office building

10

NEW DEVELOPMENTS No developments are currently under construction at this time. However, three have been proposed: • Four Energy Square – 400,000 SF Built to Suit • 8010 Park Lane – 352,000 SF Office (Community Center) Building • Office Tower in The Glen at Preston Hollow – 250,000 SF Class A Office Building

LARGE EXISTING VACANCIES • Cityplace Tower/2711 N Haskell Avenue – 123,128 SF • The Office at Park Lane/8020 Park Lane – 119,060 SF • The Hill/8041 Walnut Hill – 53,623 SF • 6060 at The Crossing/6080 N Central Expressway – 45,817 SF

• Cityplace Tower/2711 N Haskell Avenue – 44,742 SF

FAR NORTH DALLAS SUBMARKET INTELLIGENCE Absorption (129,743)

vs. Prev. Qtr

vs. 12 Mths Ago

(80,171)

245,565

VITAL STATS 20.0% 900,000

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

19.0%

19.9%

19.6%

17.0%

18.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

17.0%

966,763

1,693,094

vs. Prev. Qtr

vs. 12 Mths Ago

918,655 Delivered SF 48,108 Quoted Rates $28.29

641,191

23,334

vs. Prev. Qtr

vs. 12 Mths Ago

$27.92

$27.56

700,000 500,000 300,000 100,000

16.0% (100,000)

15.0% 14.0%

(300,000) (500,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Deliveries

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Frisco’s Wade Park has avoided a foreclosure sale that was set for April 3rd. Gamma Real Estate and Bamcap Partners are both seeking over $100 million in repayment of debt after claiming the $3 billion development has been in default. The mixed-use development will remain on hold as negotiations continue.

• Taconic Capital Advisors LP has purchased International Plaza I & II in Dallas. The 2-building complex combines 800,000 SF of Class A space which was the former headquarters for Fannie Mae and JPMorgan Chase.

• Serendipity Labs has announced a new 25,000 SF office in the new 3201 Dallas Parkway building in Hall Park in Frisco. The shared office provider joins Common Desk and WeWork as other major players to drop flags in the booming Plano/Frisco area. Serendipity Labs has plans for 8 DFW locations.

• The newly built Frisco Station – The Offices One has landed Equinix and Executive Workspace to jump start leasing. The firms have signed deals for 37,000 and 17,000 SF respectively.

In addition, VanTrust Real Estate, who owns the property, will be moving into 5,000 SF. The office complex is a part of the $1.8 billion Frisco Station project.

• Hewlett Packard has just signed a lease at Platinum Park, one of Plano’s office spaces owned and leased by Stream Realty. The term length and details of the lease have not been released but HP will be moving into over 106,000 SF. Hewlett Packard cited the on-site fitness facility, conference facility, tenant lounge, food service, Wi-Fi enabled courtyard and shuttle service to the Shops at Legacy as reasons for their final decision.

• The two main remaining pieces of undeveloped land in Plano’s coveted Legacy area are on the market for $1.65 million an acre. The available property totals 55.3 acres divided into two tracks of land which are 30.8 acres and 22.5 acres. This is an attractive location for investors due to the Far North Dallas Submarket completing over 5M SF of office space in 2017 with a 4.3M SF net absorption.

TOP LEASE TRANSACTIONS • IFM Restoration has signed a 21.1K SF sublease in Quorum Place.

• Whitley Penn has signed a 13.4K SF lease in Legacy West.

• Geoforce has signed a 13K SF lease in Granite Park V. • Perry Homes has signed a 12.5K SF lease in 5055 West Park Boulevard.

• Field Aware has signed a 12.3K SF lease in 5000 Legacy Drive.

• Ascent has signed a 12K SF lease in 6957 Plano Parkway.

• Society of Diagnostic Medical Sonography has signed an 11K SF extension in Parkway Centre III. • Trinet HR Corporation has signed a 10K SF lease in Centura Tower I.

DEALS IN THE MARKET • • • • • •

The Colonnade – a 1,051,541 SF Class A office complex 6400 Legacy – a 237,737 SF Class A office building Bent Tree Tower II – a 166,023 SF Class B office building Lincoln Legacy Two – a 130,371 SF Class A office building Parkwood Place I – a 98,750 SF Class A office building Parkway Centre I – a 87,112 SF Class A office building

NEW DEVELOPMENTS • Fourteen555 North Building – a 240,000 SF office building by Cawley • Stonebrook Building I – 90,000 SF office building with Goveia Commercial Real Estate

LARGE EXISTING VACANCIES • • • • •

International Plaza II/14221 N Dallas Parkway – 405,990 SF The Campus at Legacy/5320 Legacy Drive – 373,739 SF The Campus at Legacy West/6501 Legacy Drive – 370,625 SF International Plaza I/14201 N Dallas Parkway – 351,000 SF 4101 International Plaza – 148,085 SF 11

FORT WORTH CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

156,260

(25,462)

101,881

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.4%

13.4%

13.1%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

280,489

280,489

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$26.56

$26.36

Delivered SF 280,489 Quoted Rates $28.64

VITAL STATS 300,000

16.0%

250,000 200,000 14.0%

150,000 100,000 50,000

12.0%

0 (50,000) 10.0%

(100,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • The new downtown CVS location opened for business in June at 515 Houston Street, the former Ojos Locos restaurant site. The two-story pharmacy has more of an upscale feel and is organized such that the pharmacy counter and medicine aisles are upstairs with everyday snacks, refreshments and home goods downstairs.

• A recent study by Downtown Fort Worth, Inc. found that 1,516 new apartments and condos were under construction or completed in 2017, a 36% increase from the previous year. Even with this large number of additional units, the apartment occupancy rate is still 96%.

• After four long years of construction, the $1.4 billion I-35W expansion project was recently announced to be 97 % complete. The added express toll lanes are expected to be open by the end of the summer with full project completion slated for the end of the year. The cost of the toll will vary throughout the day based on traffic, similar to the recently completed Chisholm Trail Parkway.

• From REBusiness Online – “The traditional drivers of job and population growth have fueled new construction and strong leasing velocity for office properties in Dallas. But in Fort Worth, particularly the downtown area, the growth is more visibly tied to the live-work-play trend embodied by millennials and other young members of the workforce. The health of Fort Worth’s multifamily, restaurant and hotel markets are all contributing to the growth of the office sector.

Office developers consider a number of factors when constructing new space, much like any project.

However, location is key. As Fort Worth’s need for more housing, dining and hotels has grown the walk-ability factor has only increased in importance. As such, it’s not only the employees that are drawn to properties

12

that are located within walking distance to residential buildings and entertainment destinations. Developers are also coveting these sites.”

TOP LEASE TRANSACTIONS • GSA HUD – 98,000 SF short term extension at Burnett Plaza.

• Bank of Texas – 23,000 SF new lease at 777 Main.

• GM Financial – 18,000 SF expansion at Burnett Plaza.

• Texas Specialty Sands – 16,000 SF New Lease at One City Place.

DEALS IN THE MARKET • Oil & Gas/Star-Telegram – 440,000 SF Class B Office Complex

• XTO 714 Main – 185,000 SF Class A Office Tower • XTO Waggoner Building – 120,000 SF Class B Office Tower

LARGE EXISTING VACANCIES • 777 Main – 330,000 SF Class A Direct Vacancy • Sundance Bank of America Tower – 190,000 SF Class A Direct Vacancy • Burnett Plaza – 146,000 SF Class A Direct Vacancy • Frost Tower – 136,000 SF Class A Direct Vacancy • Oil & Gas/Star-Telegram – 110,000 SF Class B Direct Vacancy • Petroleum Building – 94,000 SF Direct Vacancy

LAS COLINAS SUBMARKET INTELLIGENCE VITAL STATS

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(782,143)

405,910

(110,815)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

16.0%

18.6%

16.1%

17.0%

14.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,869,500

857,219

2,185,900 Delivered SF 100,000 Quoted Rates $25.17

vs. Prev. Qtr

vs. 12 Mths Ago

250,000

325,262

vs. Prev. Qtr

vs. 12 Mths Ago

$25.00

$24.94

20.0%

800,000

18.0%

600,000 400,000 200,000

12.0% 0 10.0% (200,000) 8.0% (400,000)

6.0%

(600,000)

4.0%

(800,000)

2.0% 0.0%

(1,000,000) Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Absorption

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • The massive Midtown Express project is nearing completion with officials stating that they are now 90% finished. The project included widening and improving Texas 183, Texas 114 and Loop 12 across five cities in both Dallas and Tarrant counties. Construction started in the Spring of 2015 and is now slated to conclude in the Fall.

The majority of the remaining work is happening in Irving and includes the construction of a new interchange between 183 and 114.

• Nokia will consolidate its Dallas-area operations into two buildings currently under construction within The Sound at Cypress Waters. The new regional hub will span 100,000 square feet at 3100 Olympus Boulevard and the entirety of a five-story, 250,000-square-foot building at 3201 Olympus Boulevard slated to deliver at the end of this quarter and early 2019, respectively.

• The 192,000 SF Greenway Tower has been purchased.

The Boston-based Taurus Global Real Estate Investment company purchased the office building for an undisclosed amount. The building located on Highway 114 near MacArthur Boulevard is roughly 75% leased.

• 122 West, a 200,000 SF Class A office building in Las Colinas has been purchased by Irving-based Par Capital for an undisclosed amount. The building has seen more than $5 million in renovations and is 72% leased. HFF brokered the sale.

TOP LEASE TRANSACTIONS • Nokia has signed a 350,000 SF lease at The Sound at Cypress Waters.

• Darling Ingredients has signed a 95,000 SF lease at MacArthur Center I. • Nissan North America has signed a 43,000 SF lease at 8900 Freeport.

• Medallion Midstream LLC has signed a 28,000 SF lease at Tower 909.

• YPO has signed a 25,900 SF lease at Mandalay Tower 2.

• American Financial Network has signed a 7,400 SF lease in Waterway Tower.

NEW DEVELOPMENTS • A 1,125,000 SF Class A office campus is under construction in Hidden Ridge. The project is slated for delivery in July 2019 and will house Pioneer Resources.

• The Trade Group Headquarters is under construction in Grapevine. A 200,000 SF Class B building on Enchanted way, scheduled to deliver by June 2019.

• Two 250,000 SF Class A office buildings are under construction in Cypress Waters Office Park. Both buildings are being built on a spec basis with one set to deliver July 2018 and the other March 2019.

• The Music Factory 100,000 SF Class A office building is nearing completion in the Urban Center. The building is set to deliver April 2018 and is fully leased to The Ethos Group.

• Royal 10 Office Center is a 114,500 SF Class B office building under construction in Freeport. The building is set to deliver June 2018.

LARGE EXISTING VACANCIES • 1925 W John Carpenter – 405,432 SF • 901 W Walnut Hill Lane – 346,951 SF • 1915 Hurd – 322,590 SF • 5205 N O’Connor Boulevard – 334,446 SF • 6000 Connection Drive – 293,890 SF • Browning Place I – 124,648 SF • 8222 N Belt Line Road – 135,200 SF • 6031 Connection Drive – 114,524 SF • 8333 Ridgepoint Drive – 102,200 SF 13

LBJ SUBMARKET INTELLIGENCE VITAL STATS

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(30,550)

99,834

15,188

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

26.0%

21.8%

21.6%

22.9%

25.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

16,800

-

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$22.51

$21.87

Delivered SF 16,800 Quoted Rates $22.27

300,000

27.0%

250,000 200,000 150,000

24.0%

100,000 50,000

23.0%

0 22.0%

(50,000)

21.0%

(100,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • GuideStone Financial Resources has owned its headquarters at 2401 Cedar Springs in Dallas since 1989. It is relocating those headquarters late this summer to Pinnacle Tower, located at 5005 LBJ Freeway in North Dallas near the Galleria. The 115,000 SF office will get a $9 million upgrade. It checked the boxes on what employees wanted: secured, underground parking; nearby dining and an on-site fitness center.

• Fusion Laboratories Inc. leased 13,949 SF of office space in the Prism Midtown office building located at 5580 Peterson Lane near LBJ Freeway. Whitebox Real Estate’s Grant Pruitt and Cushman & Wakefield’s Robbie Baty negotiated the lease.

TOP LEASE TRANSACTIONS • ExamSoft has signed a 20.7K SF lease in Heritage Two. • Camden Homes LLC has signed a 12.3K SF lease in NCP III.

• Vixxo Corporation has signed a 10.8K SF lease in 2711 LBJ Freeway.

• Southern Wealth Management LLP has signed a 7.5K SF expansion in Pinnacle Tower.

• Lipscomb Insurance has signed a 7.4K SF deal in The

HLC Deal

Crossings I.

• Fidelity National Financial has signed a 4.5K SF lease in Hidden Grove at 12404 Park Central.

• Integrity First Financial Inc. has signed a 2K SF lease in The Centre.

14

DEALS IN THE MARKET • Toll Hill Office Park – a 258,502 SF Class B office building

• CBS Tower – a 246,955 SF Class A office building • Midtown Office Center – a 97,452 SF Class B office building • Banner Place South – a 26,298 SF Class B office building

NEW DEVELOPMENTS No developments are currently under construction at this time. However, three have been proposed: • Four Lincoln Centre – 400,000 SF • Park Tower at Dallas Midtown – 376,870 SF • The Inwood at Alpha West – 210,000 SF

LARGE EXISTING VACANCIES • 7171 Forest Lane – 162,138 SF • Pinnacle Tower/5005 LBJ Freeway – 122,071 SF • 5525 Lyndon B Johnson Freeway – 111,092 SF • LBJ Tower/8390 Lyndon B Johnson Freeway – 110,615 SF • 13342 Midway Road – 105,000 SF

MIDINTELLIGENCE CITIES SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

114,114

111,147

Vacancy

VITAL STATS 26.0%

300,000

(139,455)

25.0%

250,000

vs. Prev. Qtr

vs. 12 Mths Ago

24.0%

19.8%

20.1%

20.7%

23.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

22.0%

411,900

534,358

vs. Prev. Qtr

vs. 12 Mths Ago

-

200,000

vs. Prev. Qtr

vs. 12 Mths Ago

426,970 Delivered SF 58,400 Quoted Rates $22.37

$22.11

$22.01

200,000 150,000 100,000 50,000

21.0%

0

20.0%

(50,000)

19.0%

(100,000)

18.0%

(150,000)

17.0%

(200,000) Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Absorption

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Deliveries

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • The Texas Live! complex is slated to open in a matter of weeks on August 9th. The Rangers and Cordish Companies have announced several of the restaurants that will be opening with the project. These include “Troy’s,” a burger concept by Cowboys great Troy Aikman and “Pudge’s Pizza,” owned by Texas Rangers Hall of Famer Pudge Rodriguez. As the development also functions as a music venue, The Toadies and country artist Kip Moore will be playing on the opening weekend. The new retractable roof ballpark is also beginning to take shape. Now visible is a section of the lower seating bowl from home plate to right field.

• Southlake City Council has recently approved an updated plan for Carillon Parc, a proposed mixed-use shopping center located between North White Chapel Boulevard and Riviera Drive on SH 114. The updated $290 million plan for the 42-acre tract presented by Hunter Chase Capital Partners incorporates eight distinct districts. Each district will have its own style and will include chef-driven restaurants, artisan kiosks, local shopping, residential flats and town homes and 9 acres of green space. 8 of the 9 acres are located in the center of the development, deemed “The Parc,” and will double as a performance venue. Construction on the open-air, walkable community is slated to start by first quarter of 2019.

TOP LEASE TRANSACTIONS • Bayview Loans signed a 21,000 SF new lease at 1900 Don Dodson.

• Federal Home Bank signed a 12,000 SF new lease at 1900 Don Dodson.

DEALS IN THE MARKET • Copeland Tower – 126,602 SF Class B Office Building • Park Springs Place – 88,000 SF Class B Office Building • Stadium Place – 84,216 SF Class B Office Building LARGE EXISTING VACANCIES • Airport Centre I – 82,416 SF • 4200 Buckingham – 63,917 SF • 15100 FAA Boulevard – 60,037 SF • 3400 William D Tate – 58,110 SF

15

NORTH FORT WORTH SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

87,132

(41,217)

(156,490)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.7%

15.8%

12.5%

U/C SF 339,000 Delivered SF 25,000 Quoted Rates $19.98

vs. Prev. Qtr

vs. 12 Mths Ago

404,000

47,000

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$21.02

$19.76

VITAL STATS 20.0%

500,000

400,000 16.0% 300,000 12.0%

200,000

100,000

8.0%

0 4.0% (100,000)

0.0%

(200,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Q4 17

Deliveries

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Hillwood has announced it will be kicking off construction on two new large warehouse buildings in Alliance Texas. The new buildings will measure 782,000 SF and 500,000 SF. The buildings will be in the immediate proximity of Fort Worth Alliance Airport, BNSF’s Alliance Intermodal Facility and the FedEx Express Southwest Regional Hub along with UPS and FedEx shipping ground hubs. Hillwood will be building both buildings on a speculative basis but expects to lease them quickly with the growing demand for eCommerce in the area.

TOP LEASE TRANSACTIONS • Defi Solutions signed a 25,468 SF lease at 1500 Solana Boulevard.

• Cook Children’s signed a 9,800 SF lease at 9840 N Beach Street.

• Dermatology Associates signed a 8,034 SF lease at 9800 N Beach Street.

DEALS IN THE MARKET • 2800 Meacham Boulevard – 39,381 SF Class B Office Building • 4775 North Freeway – 21,417 SF Class B Office Building

16

NEW DEVELOPMENTS • Charles Schwab Corporate Campus – 500,000 SF Class A office building set to deliver May 2019.

• Mercedes-Benz Financial Services – 200,000 SF Class A office building set to deliver March 2019.

• 108 Countryview Drive – 30,000 SF Class B office building set to deliver December 2018.

LARGE EXISTING VACANCIES • Solana, Westlake – 1,293,572 SF across 9 Buildings • 5555 N Beach Street – 424,218 SF • 5401 N Beach Street – 431,579 SF • 2601 Meacham Boulevard – 268,290 SF • 5501 Alliance Gateway Freeway – 161,000 SF • Alliance CC 5 – 93,764 SF

PRESTON CENTER SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(4,807)

40,059

1,829

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.9%

12.8%

10.8%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

119,000 Delivered SF Quoted Rates $39.97

119,000

173,583

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$40.46

$36.71

VITAL STATS 14.0%

250,000

200,000 12.0%

150,000

100,000 10.0% 50,000

0

8.0%

(50,000)

6.0%

(100,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Deliveries

Q4 17

Q1 18

Q2 18

Vacancy Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Four Rivers Capital and Weir’s Furniture are bringing a new 297,000 SF high-rise to Dallas’ Knox Street. The approved plan will be the new home to Weirs once the product is delivered in 2020. Atlanta-based Geyer Morris Company is developing the Class A office project.

• The New York based real estate firm Compass is capitalizing on North Texas’ booming real estate scene by expanding its footprint in the market. They have signed a 24,000 SF lease in Preston Center’s Terraces at Douglas. The new office development sitting at 5960 Berkshire Lane is now 59.6% leased.

TOP LEASE TRANSACTIONS • Compass has signed a 24K SF lease in The Terraces at

NEW DEVELOPMENTS • 3219 Knox Street, Weir’s Plaza – Proposed 298,000 SF Class A office building with Geyer Morris Company.

• 3517 Hillcrest Avenue, Park Plaza – Under Construction 119,000 SF Class A office building

LARGE EXISTING VACANCIES • The Terraces at Douglas Center/5960 Berkshire Lane – 74,813 SF

• 8117 Preston Road/West Tower – 24,1625 SF • 5956 Sherry Lane/Sherry Lane Place – 15,700 • 8115 Preston Road/Preston Commons East – 15,477 SF • 8333 Douglas Avenue/Douglas Center – 12,890 SF • Highland Park Place/4514 Cole Avenue – 8,742 SF

Douglas Center.

• S2 Capital has signed a 8.2K SF leas in The Berkshire

HLC Deal

at Preston Center.

• GRP Energy Capital has signed a 5.7K SF expansion in Sherry Lane Place.

17

RICHARDSON/PLANO SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

106,516

124,163

130,472

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

21.0%

20.9%

21.9%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

444,000 Delivered SF 170,500 Quoted Rates $24.44

614,500

687,651

vs. Prev. Qtr

vs. 12 Mths Ago

79,014

58,546

vs. Prev. Qtr

vs. 12 Mths Ago

$24.59

$24.16

VITAL STATS 1,200,000

23.0%

1,000,000 22.0%

800,000 600,000

21.0%

400,000 20.0%

200,000 0

19.0%

(200,000) 18.0%

(400,000) (600,000)

17.0%

(800,000) 16.0%

(1,000,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Samsung has announced they will be bringing 1,000 jobs to their new 216,000 SF office in Legacy Central in Plano. The project, which sits on the old TI campus, has received major activity since Regent Properties announced its $100 million redevelopment.

• Fitness giant Peloton has signed a 27,000 SF lease in Legacy Central making it the first location outside of their New York City headquarters. According to CEO Brad Olson, the new lease will bring about 400 new jobs to the metroplex.

• The United States Army issued a notice to 15 cities, including Dallas, that they are being considered for a Future Command headquarters. The new location will add up to 500 jobs with the goal of creating new tech innovations for the U.S. Army.

TOP LEASE TRANSACTIONS • Paranet Solutions LLC has signed a 13.5K SF lease in Eastside Atrium.

• Education Galaxy has signed a 5.4K SF lease in The Forum at Central.

• OMAC has signed a 4.4K SF lease in 2929 NCX.

DEALS IN THE MARKET • The Points at Waterview – a 202,695 SF Class A office building

18

NEW DEVELOPMENTS No developments are currently under construction at this time. However, here are proposed spaces: • 7 CityLine – 417,000 SF • One Heritage Creekside – Phase I – 343,800 SF • Legacy Central 5 – 300,000 SF • Heritage Creekside Towers - 2,200,000 SF • CityLine – 2,000,000 SF

LARGE EXISTING VACANCIES • 601 Data Drive – 433,452 SF • Legacy Central 2 – 310,000 SF • 3400 N Central Expressway – 300,000 SF • 465 Independence Parkway – 251,347 SF • Campbell Glenn II/1125 E Campbell Road – 205,820 SF • 2221 Lakeside Boulevard – 110,425 SF

SOUTHWESTINTELLIGENCE FORT WORTH SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

50,976

(68,480)

46,722

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

10.8%

10.3%

10.4%

U/C SF 104,920 Delivered SF 129,497 Quoted Rates $23.73

vs. Prev. Qtr

vs. 12 Mths Ago

234,417

138,497

vs. Prev. Qtr

vs. 12 Mths Ago

-

38,300

vs. Prev. Qtr

vs. 12 Mths Ago

$23.84

$23.91

VITAL STATS 12.0%

250,000

200,000 11.0% 150,000 10.0%

100,000

50,000

9.0%

0 8.0% (50,000)

7.0%

(100,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Homeowners in the River Hills neighborhood directly across the street from Trademark Property’s Waterside Development are opposing the developer. Trademark recently submitted a zoning change request that would allow a hotel site within the Waterside development to be within 720 feet of eight home sites in the River Hills neighborhood. This goes against a 2014 site plan approved by the City. The dispute is on-going with concessions from both sides being offered and denied.

• Walsh Ranch, one of Fort Worth’s newest and most ambitious residential developments, is growing rapidly.

In a little over a year, 211 homes have been sold, bringing roughly 320 residents to the development.

The master-planned development is expected to have roughly 50,000 residents once completed. Walsh Elementary School is already open in the neighborhood with plans in place to add middle and high schools in later phases of the project. Along with the school, amenities for the neighborhood currently include a fitness center, a “Makerspace” building that includes woodworking tools and 3D printers, and a soon to be added resort pool and Market convenience store.

DEALS IN THE MARKET • Plaza on Hulen – 25,000 SF Class B Office Complex LARGE EXISTING VACANCIES • Pier One – 103,000 SF Class A Sublease Vacancy • Summit Office Park – 51,000 SF Class B Direct Vacancy • Western Place I & II – 42,000 SF Class B Direct Vacancy • First Command Plaza – 33,000 SF Class A Direct Vacancy • University Centre I&II – 32,000 SF Class A Direct Vacancy • 4200 Hulen – 24,000 SF Class B Direct Vacancy • 550 Bailey – 24,000 SF Class A Direct Vacancy

TOP LEASE TRANSACTIONS • Nine Energy expanded their lease by 5,507 SF at ORC HLC Deal

to now occupy 25,287 SF.

• DSS signed a 21,000 SF renewal at Overton Centre.

• Royer & Schutts signed a 12,000 SF new lease at One

HLC Deal

Museum Place.

• Weatherford signed a 7,600 SF new lease at Park Plaza.

• HKS signed a 6,400 SF new lease at 1227 W Magnolia.

• Comptroller signed a 5,500 SF new lease at Crosslands Plaza.

19

STEMMONS SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

33,352

(129,736)

83,338

Vacancy

vs. Prev. Qtr

25.6% U/C SF Delivered SF Quoted Rates $16.89

25.9%

VITAL STATS 28.0%

200,000

27.5%

150,000

vs. 12 Mths Ago

27.0%

100,000

25.5%

26.5%

50,000

26.0%

0

25.5%

(50,000)

25.0%

(100,000)

24.5%

(150,000)

24.0%

(200,000)

23.5%

(250,000)

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

-

63,000

vs. Prev. Qtr

vs. 12 Mths Ago

$16.96

$16.60

23.0%

(300,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Chewy Inc. announced their new office regional headquarters will bring 500 new jobs to Dallas’ Infomart. The pet product provider inked a 50,000 SF deal at the 1,600,000 SF office building along Stemmons Freeway in Dallas.

• The historic Cabana Hotel on Stemmons Freeway in Dallas is getting a makeover. Centurion American Development group is investing $230 million to revamp the 56-year-old hotel. Centurion’s CEO Mehrdad Moayedi has plans for new restaurants and retail to add to the 262-room hotel.

TOP LEASE TRANSACTIONS • Chewy.com has signed a 50K SF lease in The Infomart.

20

NEW DEVELOPMENTS No new developments are currently under construction at this time, however, one has been proposed: • The Design District Tower – 243,100 SF

LARGE EXISTING VACANCIES • Pegasus Place - The Tower/3000 Pegasus Park Drive – 518,656 SF

• The Connection at 8600/8600 Harry Hines Boulevard – 200,000 SF • 1430 Empire Central Drive – 160,000 SF • Comerica Service Center/1508 W Mockingbird Lane – 142,600 SF • 1300 W Mockingbird Lane – 110,121 SF • Infomart/1950 N Stemmons Freeway – 65,888 SF

SUBMARKETUPTOWN INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(156,066)

105,205

(10,066)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

13.8%

12.5%

12.3%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,178,292

1,308,292

vs. Prev. Qtr

vs. 12 Mths Ago

130,000

-

vs. Prev. Qtr

vs. 12 Mths Ago

1,178,292 Delivered SF Quoted Rates $39.04

$38.69

$37.92

VITAL STATS 800,000

16.0%

700,000 15.0%

600,000 500,000

14.0%

400,000 13.0%

300,000 200,000

12.0%

100,000 11.0%

0 (100,000)

10.0%

(200,000) (300,000)

9.0% Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Office Report

CURRENT EVENTS • Hillwood has filed plans with the city of Dallas for a new 374,000 SF, 15-story office building along Victory Avenue. Dallas-based BOKA Powell has joined forces with Hillwood to design the property on the 8-acre site.

The plans also include bringing over 13,000 SF of new retail.

• State Teachers Retirement System of Ohio, an affiliate of TIAA-CREF, has purchased a Turtle Creek high-rise for more than $330 PSF. The 13-story office property at 3131 McKinney Avenue, which was owned by Invesco Realty Advisors, is about 80% occupied. Eastdil Secured brokered the sale.

• New York-based Oaktree Capital Group has purchased The Centrum and Hall Street at the Centrum from Quadrant Capital for $175 million ($344/PSF). The twin-office towers are 80% leased and have seen more than $25 million in renovations in the past year. Cawley Partners was hired to lease and manage the buildings.

TOP LEASE TRANSACTIONS • Barnes & Thornburg has signed a 28K SF lease in PwC Tower.

• Standish Management has signed a 7.8K SF lease in The Crescent.

• Unisys Corporation has signed a 6.9K SF lease in Saint Ann Court Tower.

• Norther Trust Corporation has signed a 5K SF expansion in Harwood No. 6.

DEALS IN THE MARKET • Citymark on Katy Trail/3100 McKinnon – a 226,344 SF Class A office building

• Quadrangle Office Tower/2828 Routh – 128,905 SF Class A office building

NEW DEVELOPMENTS Under Construction • PWC Tower – 494,300 SF office building with Trammel Crow Company • The Union – 418,132 SF office building with RED Development, LLC • 2850 N Harwood Street, No. 10 – 231,098 SF office building with Harwood International.

Proposed • Victory Center – a proposed 455,526 SF office building with Hines • 2601 Victory Avenue – a proposed 347,892 SF office building with Hillwood.

• 3001 Turtle Creek Boulevard – a proposed 326,682 SF office building with Hillwood.

LARGE EXISTING VACANCIES • 2501 Cedar Springs Road – 109,404 SF • 2100 McKinney/2100 McKinney Avenue – 68,047 • 3800 Maple/3800 Maple Avenue – 67,334 SF • One McKinney Plaza/3232 McKinney Avenue – 61,533 SF • Victory Plaza West/3090 Olive Street – 51,945 SF

• Woodforrest Bank has signed a 3.7K SF lease in The Crescent.

21

DALLAS

5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955

FORT WORTH

300 Throckmorton Street Suite 550 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017

www.holtlunsford.com

HOUSTON

11757 Katy Freeway Suite 250 Houston, Texas 77079 T 713.850.8500 F 713.850.8550