CPPNJOH NBSLFU %BMMBT 'PSU 8PSUI %'8 IBT … · written permission of CBRE. MARKETVIEW DALLAS / FORT WORTH OFFICE Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross

The first quarter of 2018 proved to be a muted version of the

booming market Dallas/Fort Worth (DFW) has been

characterized by in recent years. Coming off the heels of the

first quarter with negative absorption in nearly a decade,

DFW’s fundamentals have rebounded with charisma. Total

quarterly demand leapt by nearly 580,000 sq. ft. during the

past 90 days. With 62% of total absorption, Class A

buildings naturally saw the lion’s share of activity. The

market registered a small increase in vacancy of 40 basis

points (bps) closing at 20.9% as new speculative

construction came online.

According to the Bureau of Labor Statistics, the DFW

maintained its robust job growth by adding 122,000 non-

farm jobs since June 2017, a 3.4% annualized gain,

strongest among the 12 largest U.S. metros, essentially more

than double the U.S. average of 1.6%. Of the office-using

sectors, professional and business services experienced the

largest expansion, creating 25,500 payrolls during the same

period. Meanwhile, financial activities and information

sectors also expanded with 5,400 and 900 new jobs,

respectively. DFW’s durable job market is keeping a tight lid

on unemployment, settling at a low of 3.7%, below the five-

year average of 4.5%.

Vacancy Rate Avg. Asking Rate Net Absorption Under ConstructionDeliveries

The development pipeline is pacing with demand as

three new projects broke ground over the quarter,

adding 543,000 sq. ft. of new construction to the tally

now underway, bringing the current total count to 20

projects, totaling 5.5 million sq. ft. with a strong pre-

leased rate close to 60%. The bulk of it is speculative

projects with only four build-to-suits, and 63% of the

pipeline is the Uptown/Turtle Creek and Las Colinas

submarkets, each with over 1.2 million sq. ft. There

were two deliveries totaling 225,000 sq. ft. in the Las

Colinas and Richardson/Plano submarkets.

Overall asking rents experienced upward momentum

with the average increasing 27 bps to $24.49 per sq. ft.

on a full service gross basis. Class A rates expanded to

$30.06 per sq. ft., representing a $1.46 increase from Q2

2017. Class B and C average rents increased as well by

27 bps and 365 bps, respectively. The Dallas side of the

Metroplex currently has an average asking rate of

$25.40 per sq. ft., while Fort Worth averages a lower

rate of $20.75 per sq. ft.

To learn more about CBRE Research, or to access

additional research reports, please visit the Global

Research Gateway at www.cbre.com/researchgateway.

CBRE Dallas

2100 McKinney Ave, Suite 700

Dallas, TX 75201

CBRE Houston

2800 Post Oak, Suite 2300

Houston, TX 77056

Robert C. Kramp

Director, Research & Analysis

[email protected]

E. Michelle Miller

Research Operations Manager

[email protected]

Lauren Paris

Team Lead

+1 214 979 6587

[email protected]

Alex Stewart

Research Coordinator

+1 214 979 6530

[email protected]

MARKETVIEW

MARKET FUNDAMENTALS RECALIBRATING

METROPLEX NEW JOBS RATE REMAIN STRONG

Easing off the accelerator after two years going red hot

Dallas/Fort Worth Office, Q1 2018

Q1 2018 CBRE Research © 2018 CBRE, Inc. | 1

20.5% $24.25 PSF (FSG) (470,212) SF 4.9 MSF

Figure 1: Quarterly Absorption vs. Vacancy*Arrows indicate change from previous quarter.

1.2 MSF

17.0

17.5

18.0

18.5

19.0

19.5

20.0

20.5

21.0

21.5

22.0

-2

-1

0

1

2

3

4

5

6

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Net Absorption (MSF) Vacancy Rate (%)

Source: CBRE Research, Q1 2018.Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate

CONSTRUCTION PIPELINE RISING

ASKING RENTS EXPERIENCE SLIGHT DIP

MARKETVIEW

SubmarketNet

RentableArea

TotalVacancy

(%)

TotalAvailability

(%)

AverageAsking

Rate FSG ($/SF/YR)

Under Construction

(SF)

Deliveries (SF)

Q1 2018 Net

Absorption

2018 YTD Net

Absorption

Central Expressway 10,801,178 15.8 18.8 27.35 - - (174,249) (174,249)

Class A 7,101,825 14.2 19.3 29.51 - - (163,538) (163,538)

Class B 3,586,465 8.3 18.3 25.48 - - (11,123) (11,123)

Dallas CBD 26,119,314 29.4 35.7 25.92 163,025 261,400 (50,236) (50,236)

Class A 20,925,107 31.0 37.8 28.55 163,025 261,400 101,617 101,617

Class B 4,480,135 24.8 29.1 21.01 - - (157,137) (157,137)

East Dallas 2,148,400 14.2 18.3 18.61 294,820 - (25,738) (25,738)

Class A 110,000 - - - 294,820 - - -

Class B 1,687,099 15.9 19.2 17.25 - - (57,100) (57,100)

Far North Dallas 42,617,896 19.9 25.1 25.99 630,000 393,199 (492,964) (492,964)

Class A 28,270,659 19.6 25.0 32.02 630,000 393,199 (331,687) (331,687)

Class B 14,268,868 20.2 25.0 20.98 - - (153,868) (153,868)

Las Colinas 30,639,497 16.9 24.0 25.20 1,839,500 250,000 303,409 303,409

Class A 17,190,703 13.6 23.2 29.39 1,725,000 250,000 584,179 584,179

Class B 12,893,439 21.7 25.2 21.95 114,500 - (280,770) (280,770)

LBJ Freeway 19,192,796 21.7 27.3 21.12 - - 65,064 65,064

Class A 10,412,761 20.5 27.4 24.77 - - 114,776 114,776

Class B 8,679,473 23.3 14.9 19.13 - - (51,590) (51,590)

Lewisville/Denton 3,360,379 15.7 12.6 21.43 - - (240,373) (240,373)

Class A 189,124 2.7 - 29.50 - - - -

Class B 3,105,503 16.9 13.6 20.71 - - (240,373) (240,373)

Preston Center 4,187,132 13.9 17.0 39.77 119,000 - 32,377 32,377

Class A 3,506,506 14.3 18.0 43.18 119,000 - 35,146 35,146

Class B 612,948 12.7 12.5 32.16 - - (2,629) (2,629)

Richardson/Plano 22,263,306 20.8 25.6 21.81 275,000 - 51,752 51,752

Class A 11,335,781 24.0 29.6 25.56 275,000 - 109,682 109,682

Class B 10,611,897 18.0 22.0 19.01 - - (69,909) (69,909)

SW Dallas 1,503,736 11.4 11.8 19.52 - - 45,080 45,080

Class A 280,592 11.1 12.8 31.00 - - - -

Class B 1,037,490 12.9 12.8 19.17 - - 45,080 45,080

Stemmons Freeway 9,028,469 27.2 31.2 16.38 - - (17,077) (17,077)

Class A 4,213,870 19.5 25.8 19.00 - - 12,663 12,663

Class B 4,365,040 34.7 37.5 15.02 - - (36,231) (36,231)

Uptown/Turtle Creek 11,427,406 13.3 19.5 43.26 1,273,530 - (114,508) (114,508)

Class A 9,477,768 11.7 18.0 45.82 1,273,530 - (76,139) (76,139)

Class B 1,811,754 22.7 28.6 36.45 - - (38,369) (38,369)


DALLAS/FORT WORTH OFFICE

Figure 2: Dallas/Fort Worth Office Market Statistics

MARKETVIEW



Figure 2: Dallas/Fort Worth Office Market Statistics (continued)

Figure 3: Significant Leases / Sales of the Quarter

Source: CBRE Research, Q1 2018.


16%

12%

4%

14%

54%

Financial Services Business ServicesRetailers/Wholesalers Information/TechnologyOther

Figure 4: 2018 Signed Leases by Industry


SubmarketNet

RentableArea

TotalVacancy

(%)

TotalAvailability

(%)

AverageAsking

Rate FSG ($/SF/YR)

UnderConstruction

(SF)

Deliveries(SF)

Q1 2018Net

Absorption

2018 YTDNet

Absorption

Fort Worth CBD 8,264,313 13.7 16.3 25.58 - 280,489 (13,454) (13,454)

Class A 5,829,520 13.1 17.2 29.04 - 280,489 43,499 43,499

Class B 2,332,418 15.7 14.5 20.69 - - (56,953) (56,953)

Mid Cities 13,534,021 23.1 25.3 18.91 - - 37,764 37,764

Class A 4,598,182 35.4 37.4 22.85 - - 84,604 84,604

Class B 8,024,352 17.2 19.5 17.92 - - (60,958) (60,958)

North Fort Worth 1,704,175 15.3 33.6 26.30 288,000 - 64,482 64,482

Class A 725,711 24.8 25.2 23.73 200,000 - - -

Class B 940,746 8.6 41.4 19.23 88,000 - 64,482 64,482

NE Fort Worth 2,719,303 58.1 59.1 17.81 - - 18,432 18,432

Class A 415,921 73.8 75.4 21.47 - - - -

Class B 2,200,848 56.9 58.3 17.37 - - 18,432 18,432

South Fort Worth 6,158,613 12.2 15.2 23.01 - - 40,027 40,027

Class A 2,172,643 13.3 14.3 28.31 - - 64,645 64,645

Class B 3,508,625 11.4 14.7 22.29 - - (12,005) (12,005)

Dallas Total 183,289,509 20.4 25.7 25.13 4,594,875 904,599 (617,463) (617,463)

Class A 113,014,696 20.2 26.5 30.51 4,480,375 904,599 386,699 386,699

Class B 67,140,111 21.2 24.7 20.65 114,500 - (1,054,019) (1,054,019)

Fort Worth Total 32,380,425 21.2 24.2 20.47 288,000 280,489 147,251 147,251

Class A 13,741,977 23.0 25.7 25.18 200,000 280,489 192,748 192,748

Class B 17,006,989 20.5 24.1 18.90 88,000 - (47,002) (47,002)

DFW Total 215,669,934 20.5 25.5 24.25 4,882,875 1,185,088 (470,212) (470,212)

Class A 126,756,673 20.5 26.5 29.59 4,680,375 1,185,088 579,447 579,447

Class B 84,147,100 21.0 24.6 20.27 202,500 - (1,101,021) (1,101,021)

Lease (Tenant) Building Name Address Total SF

Steward Health Care Galatyn Commons – B 2375 N Glenville Dr 165,300

New York Life Insurance Two Energy Square 4849 Greenville Ave 107,267

Guidestone Financial Resources

Pinnacle Tower 5005 LBJ Freeway 112,825

Sale (Buyer) Building Name Address Total SF

Cook Children’s Medical Center

Wilcox at Green Oaks 7000 Calmont Ave 187,927

Libitzky Property Companies

Preston Park1820 Preston Park Blvd

120,507

*Although Class C is not shown, totals are inclusive of all classes of data.

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

MARKETVIEW DALLAS / FORT WORTH OFFICE

Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross and/or FullService Gross, dependent upon Submarket. Availability All existing space beingmarketed for lease. Total Vacancy Rate Direct Vacancy + Sublease Vacancy. CBDCentral Business District; consists of Dallas’ Central Business District only.

CBRE’s market report analyzes existing single- and multi-tenant office buildings thattotal 30,000+ sq. ft. in Dallas / Fort Worth, excluding owner-occupied buildings.CBRE assembles all information through telephone canvassing, third-party vendors,and listings received from owners, tenants and members of the commercial realestate brokerage community.

SURVEY CRITERIA

DEFINITIONS

CBRE OFFICESCONTACTS

MARKETVIEW

15

16

17

18

19

20

21

22

23

0

1

2

3

4

5

6

7

8

9

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012

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012

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012

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012

Q1 2

013

Q2 2

013

Q3 2

013

Q4 2

013

Q1 2

014

Q2 2

014

Q3 2

014

Q4 2

014

Q1 2

015

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015

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015

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015

Q1 2

016

Q2 2

016

Q3 2

016

Q4 2

016

Q1 2

017

Q2 2

017

Q3 2

017

Q4 2

017

Vacancy Rate %Under Construction (MSF)

Under Construction Vacancy Rate

Construction pipeline subsides; lowest since Q2 2013.



19.6% $24.48 PSF (FSG) 1,052,283 SF 4.4 MSF

Figure 1: Under Construction vs. Vacancy (MSF)*Arrows indicate change from previous quarter.


1.1 MSF

MARKETVIEW

SubmarketNet

RentableArea

TotalVacancy

(%)

TotalAvailability

(%)

AverageAsking

Rate FSG ($/SF/YR)

Under Construction

(SF)

Deliveries (SF)

Q4 2017 Net

Absorption

2017 YTD Net

Absorption

Central Expressway 11,004,604 13.4 17.9 27.32 - - (14,983) 20,628

Class A 7,247,788 12.9 17.5 30.30 - - (45,847) 95,247

Class B 3,643,928 14.4 19.1 24.61 - - 31,211 (71,940)

Dallas CBD 25,838,939 28.6 34.2 26.02 322,110 185,071 299,705 471,523

Class A 20,644,732 30.8 36.8 28.72 322,110 185,071 298,269 542,552

Class B 4,480,135 21.3 25.0 21.10 - - 5,428 (28,403)

East Dallas 2,155,335 10.7 16.5 18.01 294,820 - 45,636 53,845

Class A 110,000 0.0 0.0 48.80 294,820 - 6,067 -

Class B 1,629,636 11.5 16.8 16.39 - - 39,569 26,426

Far North Dallas 41,366,773 17.0 23.1 26.52 1,289,335 632,957 152,844 931,549

Class A 26,933,656 16.3 21.8 32.58 1,289,335 552,957 107,024 613,085

Class B 14,354,748 18.0 25.2 21.44 - 80,000 45,820 327,720

Las Colinas 30,512,997 17.3 24.8 24.43 714,500 - (102,148) 468,411

Class A 16,940,860 15.6 22.6 28.82 600,000 - 54,228 294,756

Class B 13,016,782 20.0 27.8 21.54 114,500 - (156,507) 148,638

LBJ Freeway 19,230,504 21.3 27.7 20.92 - - 222,580 190,640

Class A 10,406,337 22.0 27.3 24.01 - - 104,911 135,651

Class B 8,667,855 20.7 28.5 18.88 - - 118,373 59,919

Lewisville/Denton 3,397,794 10.8 18.5 19.65 - - 14,360 11,734

Class A 324,964 0.0 0.0 29.50 - - 0 0

Class B 3,006,785 12.2 20.9 24.19 - - 14,360 11,734

Preston Center 4,184,884 10.6 18.3 40.18 119,000 171,583 21,975 (33,925)

Class A 3,506,506 10.4 19.5 42.61 119,000 171,583 28,607 (53,871)

Class B 610,700 12.3 12.8 33.30 - - (6,632) (587)

Richardson/Plano 21,678,024 21.6 26.6 22.08 125,000 87,467 384,461 619,450

Class A 11,000,460 25.6 30.0 26.16 125,000 48,441 111,871 289,376

Class B 10,361,936 17.8 23.6 19.38 - 39,026 278,239 344,868

SW Dallas 1,503,736 14.4 14.9 17.03 - - (8,519) 32,496

Class A 280,592 11.1 11.1 31.00 - - (17,377) (15,541)

Class B 1,037,490 17.2 17.4 16.70 - - 8,858 45,937

Stemmons Freeway 9,102,749 26.3 29.6 16.33 - - 100,471 120,308

Class A 4,213,870 19.8 23.6 19.13 - - 55,019 19,385

Class B 4,298,845 31.4 34.7 14.45 - - 47,363 53,434

Uptown/Turtle Creek 11,175,483 12.8 15.9 44.41 1,273,530 - (16,380) 48,463

Class A 9,431,810 11.3 13.9 46.77 1,273,530 - 9,673 204,675

Class B 1,605,789 23.2 28.9 36.62 - - (26,053) (156,212)




MARKETVIEW







25%

15%

9%19%

32%




SubmarketNet

RentableArea

TotalVacancy

(%)

TotalAvailability

(%)

AverageAsking

Rate FSG ($)

UnderConstruction

(SF)

Deliveries(SF)

Q4 2017Net

Absorption

2017 YTDNet

Absorption

Fort Worth CBD 8,408,884 12.9 15.7 25.62 280,489 - (9,636) 62,028

Class A 5,829,520 13.8 16.1 29.57 280,489 - 8,340 45,059

Class B 2,476,989 11.3 15.5 20.26 - - (17,976) 16,969

Mid Cities 13,567,516 22.8 24.7 18.95 - - 128,171 (110,321)

Class A 4,464,182 36.3 37.7 23.68 - - 22,359 (322,184)

Class B 8,191,847 16.4 18.4 18.00 - - 102,073 179,166

North Fort Worth 1,775,196 18.9 43.2 20.07 - - (181,429) (433,271)

Class A 725,711 24.8 54.1 NA - - (161,000) (369,623)

Class B 1,011,767 15.3 37.0 20.07 - - (21,026) (66,333)

NE Fort Worth 2,745,352 56.8 42.9 18.13 - - (4,040) (19,950)

Class A 415,921 73.8 74.2 21.47 - - - 396

Class B 2,226,897 55.3 38.4 17.76 - - (4,040) (33,713)

South Fort Worth 6,203,357 12.8 17.0 23.23 - - 47,282 66,529

Class A 2,172,643 16.2 18.1 28.78 - - 79,601 66,950

Class B 3,548,473 11.0 15.9 22.79 - - (35,636) (16,695)

Dallas Total 181,151,348 19.3 25.0 25.07 4,138,295 1,077,078 1,071,935 3,129,635

Class A 111,041,575 19.6 25.0 30.19 4,023,795 958,052 754,732 2,272,513

Class B 66,714,448 19.1 25.3 20.62 114,500 119,026 331,798 811,676

Fort Worth Total 32,700,305 21.0 23.5 19.02 280,489 0 (19,652) (434,985)

Class A 13,607,977 24.0 27.3 25.60 280,489 0 (50,700) (579,402)

Class B 17,455,973 19.5 21.1 19.25 0 0 23,395 79,394

DFW Total 213,851,653 19.6 24.7 24.48 4,418,784 1,077,078 1,052,283 2,694,650

Class A 124,649,552 20.1 25.2 29.64 4,304,284 958,052 704,032 1,693,111

Class B 84,170,421 19.2 24.4 20.61 114,500 119,026 355,193 891,070

Lease (Tenant) Building Name Address Total SF

Pacific Union Financial Browning Place II 1603 LBJ Freeway 132,000

Sonexus Health Highpoint Oaks2701 Highpoint Oaks Dr

72,620

Winston and Strawn PwC Tower 2121 Pearl Street 56,016

Sale (Buyer) Building Name Address Total SF

Stanton Road Capital Trinity Towers2777 N Stemmons Fwy

634,381

CW Capital Asset Management

901 W Walnut Hill 901 W Walnut Hill Ln 416,556

*Although Class C is not shown, totals are inclusive of all classes of data.





SURVEY CRITERIA

DEFINITIONS


MARKETVIEW

16

17

18

19

20

21

22

23

24

25

0

1

2

3

4

5

6

7

8

9

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01

2

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01

2

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01

2

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01

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01

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01

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01

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01

7

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01

7

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01

7

Vacancy Rate %Under Construction (MSF)


Construction cycle looks to have peaked a year ago



19.7% $24.24 PSF 976,431 SF 5.5 MSF

Figure 1: Under Construction vs. Vacancy (MSF)*Arrows indicate change from previous quarter.


MARKETVIEW

Submarket

Net Rentable

Area

TotalVacancy

(%)

TotalAvailability

(%)

AverageAsking

Rate ($)

Under Construction

(SF)

Deliveries (SF)

Q3 2017 Net

Absorption

2017 YTD Net

Absorption

Central Expressway 10,935,593 12.5 17.1 27.13 - - 24,674 35,612

Class A 7,216,704 12.3 17.1 30.16 - 18,574 141,094

Class B 3,606,001 13.0 17.4 24.39 - 4,898 (103,151)

Dallas CBD 25,669,217 28.5 35.1 26.01 507,181 - (88,528) 171,818

Class A 20,459,661 30.8 38.0 28.75 507,181 - (151,402) 244,283

Class B 4,497,198 20.8 20.8 21.18 - - 74,803 (33,831)

East Dallas 2,155,335 12.8 16.0 18.39 294,820 - 39,794 8,209

Class A 110,000 5.5 - 48.80 294,820 - (6,067) (6,067)

Class B 1,629,636 13.9 18.1 16.71 - - 44,568 (13,143)

Far North Dallas 41,219,473 16.2 22.9 25.84 1,922,292 - 62,394 778,705

Class A 26,833,636 15.1 21.6 32.01 1,842,292 - 64,461 506,061

Class B 14,307,468 17.9 25.2 20.80 80,000 - (2,067) 281,900

Las Colinas 30,217,151 17.3 25.4 24.91 689,500 141,219 333,692 570,559

Class A 16,834,259 16.5 25.4 29.03 575,000 141,219 307,320 240,528

Class B 12,827,537 18.9 25.8 21.40 114,500 - 38,502 305,145

LBJ Freeway 19,283,611 22.5 28.5 20.81 - - 222,580 190,640

Class A 10,410,777 23.2 28.9 23.93 - - 104,911 135,651

Class B 8,716,522 22.0 28.2 18.74 - - 118,373 59,919

Lewisville/Denton 3,397,794 10.8 18.5 19.65 - - 777 (2,626)

Class A 324,964 - - 29.50 - - - -

Class B 3,006,785 12.2 20.9 24.19 - - 777 (2,626)

Preston Center 4,027,887 11.9 15.1 39.22 290,583 - (28,455) (55,900)

Class A 3,349,509 12.2 15.6 42.60 290,583 - (34,702) (82,478)

Class B 610,700 11.2 13.8 30.72 - - 6,247 6,045

Richardson/Plano 21,523,815 21.7 25.5 21.64 212,467 300,000 266,662 234,989

Class A 10,806,441 24.6 28.6 26.26 173,441 300,000 160,059 177,505

Class B 10,401,746 19.6 22.8 18.72 39,026 - 102,603 66,629

SW Dallas 1,503,736 13.8 14.6 17.07 55,000 - 56,608 41,015

Class A 280,592 4.9 6.7 25.00 - - - 1,836

Class B 1,037,490 18.1 18.3 16.74 55,000 - 56,608 37,079


Class A 4,214,254 21.1 24.3 19.10 - - (19,925) (35,634)

Class B 4,306,554 32.4 35.8 14.23 - - 49,632 6,071

Uptown/Turtle Creek 11,356,787 12.5 15.7 42.53 1,273,530 - 5,676 64,843

Class A 9,324,254 11.5 14.4 44.73 1,273,530 - (7,706) 195,002

Class B 1,894,649 18.3 23.5 36.80 - - 13,382 (130,159)




Although Class C is not shown, totals are inclusive of all classes of data.

MARKETVIEW







21%

10%

9%

18%

42%




Net Total Total Average Under Q3 2017 2017 YTD

Submarket Rentable Vacancy Availability Asking Construction Deliveries Net Net

Area (%) (%) Rate ($) (SF) (SF) Absorption Absorption

Fort Worth CBD 8,273,594 13.0 16.7 25.81 280,489 - 50,352 71,664

Class A 5,889,851 13.8 17.1 29.65 280,489 - 55,840 36,719

Class B 2,281,368 11.5 16.6 20.94 - - (5,488) 34,945

Mid Cities 13,580,515 23.4 26.0 18.95 - 113,840 145,385 (238,492)

Class A 4,469,216 38.6 38.1 23.68 - 113,840 155,547 (344,543)

Class B 8,199,812 17.1 20.3 18.00 - - (4,007) 77,093

North Fort Worth 1,775,196 20.8 25.4 20.12 - - (218,161) (251,842)

Class A 725,711 32.2 32.9 - - - (214,434) (208,623)

Class B 1,011,767 13.3 21.0 20.12 - - (6,087) (45,307)

NE Fort Worth 2,744,290 56.7 59.7 17.28 - - 11,996 (27,906)

Class A 414,859 74.0 75.2 21.47 - - 396 396

Class B 2,200,848 55.1 58.6 16.83 - - (8,772) (31,066)

South Fort Worth 6,169,326 13.7 16.6 23.26 - - 35,232 19,247

Class A 2,137,541 20.2 20.6 28.95 - - 51,705 (12,651)

Class B 3,596,344 10.0 14.7 22.65 - - (10,018) 18,941

Dallas Total 180,366,241 19.3 25.1 24.74 5,190,373 496,219 951,627 2,057,656

Class A 110,165,051 19.5 25.5 29.78 4,956,847 441,219 435,523 1,517,781

Class B 66,842,579 19.3 24.9 20.36 233,526 55,000 508,326 479,878

Fort Worth Total 32,542,921 21.6 24.7 19.16 280,489 113,840 24,804 (415,333)

Class A 13,637,178 25.2 27.1 25.69 280,489 113,840 49,054 (528,702)

Class B 17,316,188 19.6 23.6 19.37 - - (24,207) 55,999

DFW Total 212,909,162 19.7 25.1 24.24 5,470,862 610,059 976,431 1,642,323

Class A 123,802,229 20.1 25.7 29.32 5,237,336 555,059 484,577 989,079

Class B 84,158,767 19.4 24.7 20.46 233,526 55,000 484,119 535,877

Lease (Tenant) Address Total SF

NTT Data 6501 Legacy Dr 250,000

Gartner 6011 Connection Dr 150,000

Alkami 5601 Granite Pky 90,000

Sale (Buyer) Address Total SF

KBS Strategic Opportunity 125 E John Carpenter Fwy 401,735

Tanglewood Property Group 17950 Preston Rd 273,992





SURVEY CRITERIA

DEFINITIONS


MARKETVIEW

Business as usual-fundamentals remain strong.


It’s a bird… It’s a plane… No, it’s just one of the many cranes spotted throughout the DFW Metroplex. The pipeline still remains sizeable with 30 projects totaling 5.5 million sq. ft., at 37.0% pre-leased. Of the 30 projects, over 21 are greater than 100,000 sq. ft. It is important to note the 1.1 million sq. ft. Liberty Mutual campus was removed from CBRE’s statistical set after they purchased the building, classifying it owner occupied.

DFW speculative development continues to comprise the majority of the construction pipeline, with only two build-to-suits (BTS) out of 30 total projects. The largest building to start construction this quarter was The Epic, a class A 294,820 sq. ft. multi-use development in the unique Deep Ellum neighborhood in Dallas.

Delivery of prime, new product in the Metroplex contributed to year-over-year rent growth. Average asking rents jumped 3.2%, closing the quarter at $24.01 per sq. ft. While Fort Worth currently sits at $19.53 per sq. ft. the Dallas average is slightly higher at $24.44 per sq. ft. Class A rents continue to push up as prime class A buildings are delivered, increasing 74 basis points from last quarter.


Vacancy Rate19.4%

Avg. Asking Rate$24.01 PSF

Net Absorption121,696 SF

Under Construction5.5 MSF

Figure 1: Under Construction vs. Absorption (MSF) *Arrows indicate change from previous quarter.


Strong demand characterized leasing velocity during the first half of 2017 led by Far North Dallas and Dallas CBD. Enlink and Industrious occupied One Arts Plaza in Dallas CBD which was left vacant from 7-Eleven’s relocation to Las Colinas last year. While Industrious, a coworking center, helped fill 23,000 sq. ft., Enlink’s156,000 sq. ft. expansion and relocation from Uptown was the largest moves this quarter. NTT Data occupied 126,700 sq. ft. in the recently delivered One Legacy West and is already considering an expansion.

DFW’s unemployment rate of 3.8% remains well below the U.S. average of 4.4%. Of the office using job sectors, professional & business services added the most jobs by percentage, increasing by 4.2% over February of last year.

It is hard to compete with last year’s record setting statistics, but Dallas/Fort Worth’s office market has continued its strong performance. With vacancy varying just slightly over last quarter, large construction levels beginning to taper, absorption still remains solid with the 29th consecutive quarter of positive absorption. Simply put, this is the longest running growth streak in DFW’s office market history.

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Vacancy Rate %Under Construction(MSF)


MARKETVIEW




Net Rentable

Area

TotalVacancy

(%)

TotalAvailability

(%)

AverageAsking

Rate ($)

Under Construction

(SF)

Deliveries (SF)

Q2 2017 Net

Absorption

2017 YTD Net

AbsorptionCentral Expressway 10,918,417 12.8 16.4 26.87 - - (10,247) 10,938

Class A 7,200,405 12.6 16.1 29.67 - (272) 122,520

Class B 3,605,124 13.2 17.4 24.48 - (5,090) (108,049)

Dallas CBD 25,453,584 27.5 34.9 26.86 446,471 - 336,472 260,346

Class A 20,244,221 29.2 37.5 28.51 446,471 - 358,190 395,685

Class B 4,497,005 22.4 26.5 23.19 - - 10,515 (108,634)

East Dallas 2,186,177 14.4 17.3 18.26 251,354 - (3,792) (31,585)

Class A 110,000 - - 38.80 251,354 - - -

Class B 1,629,636 16.7 20.4 16.96 - - (4,681) (57,711)Far North Dallas 41,301,990 16.1 22.6 25.54 1,628,192 - 314,271 716,311

Class A 26,901,752 15.0 21.0 31.20 1,548,192 - 311,165 441,600

Class B 14,321,869 17.9 25.4 21.03 80,000 - 5,559 283,967

Las Colinas 30,077,480 17.3 24.3 24,43 716,219 339,359 -17,424 236,867

Class A 16,693,040 17.5 23.6 28.35 716,219 339,359 -114,952 (66,792)

Class B 12,829,085 17.7 25.8 21.28 - - 71,811 266,643

LBJ Freeway 19,284,290 23.5 28.3 20.59 - - 6,164 (31,940)

Class A 10,410,777 23.9 28.7 23.53 - - 7,367 30,740

Class B 8,717,201 23.3 28.0 18.62 - - 1,023 (58,454)

Lewisville/Denton 3,397,501 10.8 21.6 18.82 - - 15,914 (3,403)

Class A 324,964 - 75.1 28.41 - - - -

Class B 3,006,785 12.2 16.3 21.74 - - 15,914 (3,403)

Preston Center 4,027,005 11.2 16.1 38.87 171,583 - (11,786) (27,445)

Class A 3,348,627 11.1 16.6 42.11 171,583 - (18,928) (47,776)

Class B 610,700 12.2 14.7 31.28 - - 2,208 (202)

Richardson/Plano 20,953,403 20.1 23.3 22.00 512,467 - 82,779 (31,673)

Class A 10,394,020 20.3 24.1 25.17 473,441 - 80,741 17,446

Class B 10,246,409 20.3 22.7 19.54 39,026 - 5,446 (35,974)

SW Dallas 1,452,815 14.4 15.5 17.29 55,000 - (26,258) (15,593)

Class A 280,592 4.9 6.7 25.00 - - 1,836 1,836

Class B 986,569 19.2 19.7 16.97 55,000 - (28,094) (19,529)

Stemmons Freeway 9,044,800 28.1 31.6 15.99 - - (55,499) (35,961)

Class A 4,214,254 20.7 25.2 18.82 - - (37,506) (15,709)

Class B 4,275,512 33.8 36.7 14.61 - - (40,347) (43,561)


Class A 9,328,550 11.4 14.5 44.72 1,273,530 - 120,401 202,708

Class B 1,894,203 19.0 27.3 33.62 - - (102,381) (143,541)


MARKETVIEW







29%

15%15%

23%

18%




Net Total Total Average Under Q2 2017 2017 YTDSubmarket Rentable Vacancy Availability Asking Construction Deliveries Net Net

Area (%) (%) Rate ($) (SF) (SF) Absorption AbsorptionFort Worth CBD 8,368,345 12.7 17.3 25.81 280,489 - (48,114) 21,312

Class A 5,984,611 13.5 17.3 29.65 280,489 - (43,677) (19,121) Class B 2,281,368 11.3 18.1 20.95 - - (4,437) 40,433

Mid Cities 13,469,459 24.2 26.9 19.07 113,840 - (385,113) (383,877)Class A 4,365,073 38.6 38.8 23.51 113,840 - (489,628) (500,090)Class B 8,192,899 17.7 21.7 18.10 - - 85,100 81,100

North Fort Worth 1,775,196 8.5 25.2 19.13 - - (8,601) (33,681)Class A 725,711 2.6 32.9 - - - 0 5,811

Class B 1,011,767 12.7 20.9 19.13 - - (8,601) (39,220)

NE Fort Worth 2,744,290 56.4 60.2 16.79 - - (7,681) (27,906)Class A 414,859 61.3 62.5 21.34 - - - -

Class B 2,200,848 56.7 60.9 16.35 - - (8,772) (31,066)

South Fort Worth 6,124,346 12.9 18.4 23.95 - - (77,409) (15,985)

Class A 2,132,446 17.2 22.5 29.88 - - (116,669) (64,356)

Class B 3,558,284 10.5 16.5 22.12 - - 39,484 28,959

Dallas Total 179,453,802 19.1 24.7 24.44 5,054,816 339,359 648,614 1,106,029

Class A 109,451,202 18.9 24.7 29.11 4,880,790 - 708,042 973,897

Class B 66,620,098 19.7 25.1 20.51 174,026 339,359 (68,117) (28,448)

Fort Worth Total 32,481,645 21.2 25.5 19.53 394,329 - (526,918) (440,137)

Class A 13,627,196 23.8 27.5 25.89 394,329 - (649,974) (577,756)

Class B 17,269,427 19.9 24.8 19.45 - - 102,774 80,206

DFW Total 211,935,447 19.4 24.9 24.01 5,449,145 339,359 121,696 665,892

Class A 123,078,398 19.5 25.0 28.81 5,275,119 - 58,068 396,141

Class B 83,889,525 19.8 25.0 20.53 174,026 339,359 34,657 51,758


Comerica Bank 1717 Main St 222,970

Brinker International 3000 Olympus Blvd 216,400

Goldman Sachs 2001 Ross Ave 170,288


Lincoln Property Company 3500 Maple Ave 369,109

JP Realty Partners 12770 Coit Rd 258,493





SURVEY CRITERIA

DEFINITIONS

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.

CBRE OFFICES

CBRE Dallas2100 McKinney Ave, Suite 700Dallas, TX 75201

CBRE Houston2800 Post Oak, Suite 2300Houston, TX 77056

CONTACTS

Robert C. KrampDirector, Research & [email protected]

E. Michelle MillerResearch Operations [email protected]

Lauren Paris Senior Research Analyst+1 214 979 [email protected]

Alex StewartResearch Coordinator+1 214 979 [email protected]

MARKETVIEW

Table set for another solid year

for office leasing



19.1% $23.95 PSF 544,241 SF 6.1 MSF

Figure 1: Under Construction vs. Absorption (MSF)*Arrows indicate change from previous quarter.


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Vacancy Rate %Net Absorption (MSF)

Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate

MARKETVIEW




Net Rentable

Area

TotalVacancy

(%)

TotalAvailability

(%)

AverageAsking

Rate ($)

Under Construction

(SF)

Deliveries (SF)

Q1 2017 Net

Absorption

2017 YTD Net

Absorption

Central Expressway 10,916,956 12.6 16.3 26.42 - - 21,185 21,185

Class A 7,198,698 12.4 16.7 29.59 - 122,792 122,792

Class B 3,605,370 13.0 15.9 23.34 - (102,959) (102,959)

Dallas CBD 25,442,945 27.9 33.3 25.26 446,471 - (76,126) (76,126)

Class A 20,244,221 29.8 35.5 27.57 446,471 - 37,495 37,495

Class B 4,486,366 22.7 26.7 20.27 - - (119,149) (119,149)

East Dallas 2,637,665 27.5 29.0 14.91 - - (27,793) (27,793)

Class A 110,000 - - - - - - -

Class B 2,081,124 32.7 34.4 15.27 - - (53,030) (53,030)

Far North Dallas 41,011,293 16.9 22.0 26.82 2,449,825 566,265 402,040 402,040

Class A 26,610,785 16.2 21.5 31.22 2,369,825 566,265 130,435 130,435

Class B 14,322,139 18.0 22.8 18.88 80,000 - 278,408 278,408

Las Colinas 29,939,898 15.7 21.5 24.39 805,578 544,183 254,291 254,291

Class A 16,699,215 16.3 22.1 28.42 466,219 544,183 48,160 48,160

Class B 12,639,892 15.4 21.4 20.88 339,359 - 194,832 194,832

LBJ Freeway 19,280,537 22.8 26.8 18.78 - - (38,104) (38,104)

Class A 10,408,036 22.6 27.5 21.49 - - 23,373 23,373

Class B 8,716,189 23.3 26.3 17.24 - - (59,477) (59,477)

Lewisville/Denton 4,220,256 10.3 22.6 19.67 - - (19,317) (19,317)

Class A 324,964 - 75.1 26.00 - - - -

Class B 3,829,540 11.3 18.5 19.68 - - (19,317) (19,317)

Preston Center 4,027,005 10.9 15.3 35.46 171,583 - (15,659) (15,659)

Class A 3,348,627 10.6 15.1 38.39 171,583 - (28,848) (28,848)

Class B 610,700 12.6 16.6 30.05 - - (2,410) (2,410)

Richardson/Plano 20,933,772 19.5 24.4 21.60 508,152 - (114,452) (114,452)

Class A 10,389,251 19.8 25.5 24.94 469,417 - (63,295) (63,295)

Class B 10,243,435 19.6 23.5 19.58 38,735 - (41,420) (41,420)

SW Dallas 1,449,898 12.7 14.3 16.56 - - 10,665 10,665

Class A 280,729 5.5 7.3 21.00 - - - -

Class B 983,515 16.4 17.9 16.30 - - 8,565 8,565


Class A 4,204,644 21.9 27.0 16.83 - - 21,797 21,797

Class B 4,275,512 32.9 37.4 13.68 - - (3,214) (3,214)


Class A 9,319,243 12.3 13.7 44.27 1,295,323 - 82,307 82,307

Class B 1,894,884 13.5 28.2 34.14 - - (41,160) (41,160)


MARKETVIEW







23%

34%

19%

11%

13%

Financial Services Business ServicesRetailers/Wholesalers TechnologyOther



Net Total Total Average Under Q1 2017 2017 YTD

Submarket Rentable Vacancy Availability Asking Construction Deliveries Net Net

Area (%) (%) Rate ($) (SF) (SF) Absorption Absorption

Fort Worth CBD 8,360,455 13.4 15.4 25.46 280,489 - 69,426 69,426

Class A 5,984,611 14.5 14.2 29.25 280,489 - 24,556 24,556

Class B 2,273,469 11.1 19.3 21.04 - - 44,870 44,870

Mid Cities 13,409,972 20.8 26.7 17.39 113,840 160,000 1,236 1,236

Class A 4,365,073 27.4 40.1 20.49 113,840 160,000 (10,462) (10,462)

Class B 8,133,412 17.8 20.7 17.50 - - (4,000) (4,000)

North Fort Worth 1,822,884 7.8 26.9 19.71 - - (25,080) (25,080)

Class A 723,399 2.7 32.7 - - - 5,811 5,811

Class B 1,061,767 11.3 23.5 19.71 - - (30,619) (30,619)

NE Fort Worth 2,718,241 56.7 58.8 17.19 - - (20,225) (20,225)

Class A 414,859 61.3 62.5 21.34 - - - -

Class B 2,200,848 57.0 59.2 16.64 - - (22,294) (22,294)

South Fort Worth 6,121,638 12.9 18.4 23.95 - 160,182 61,424 61,424

Class A 2,132,446 17.2 22.5 29.88 - 160,182 52,313 52,313

Class B 3,558,284 10.5 16.5 22.12 - - (10,525) (10,525)

Dallas Total 180,243,129 19.1 24.0 24.43 5,676,932 1,110,448 457,460 457,46

Class A 109,138,413 19.1 24.3 28.81 5,218,838 1,110,448 374,216 374,216

Class B 67,688,666 19.3 24.0 21.35 458,094 - 39,669 39,669

Fort Worth Total 32,433,190 19.7 24.9 20.01 394,329 320,182 86,781 86,781

Class A 13,620,388 19.9 26.2 25.02 394,329 320,182 72,218 72,218

Class B 17,227,780 20.0 24.7 19.05 - - (22,568) (22,568)

DFW Total 212,676,319 19.1 24.2 23.95 6,071,261 1,430,630 544,241 544,241

Class A 122,758,801 19.2 24.5 28.60 5,613,167 1,430,630 446,434 446,434

Class B 84,916,446 19.5 24.2 21.02 458,094 - 17,101 17,101


Brinker International 3000 Olympus Blvd 216,400

NTT Data 7950 Legacy Dr. 126,715

Akin Gump 2300 N Field St 68,000


Lincoln Property Company 3500 Maple Ave 369,109

JP Realty Partners 12770 Coit Rd 258,493





SURVEY CRITERIA

DEFINITIONS


MARKETVIEW

New construction tapers but still pushes up DFW asking rents

Dallas / Fort Worth Office, Q4 2016

Robust: in a word, growth in the DFW office market during 2016. But the brisk pace of new development does appear to be levelling as the year closes with less than 6.7 million sq. ft. underway and is now the lowest since 2014. Another sign the new development cycle is slowing down, fewer than five buildings delivered in the current quarter totaling just more than 350,000 sq. ft., making it the lowest square footage of deliveries in a full three years. Meanwhile, the pre-leased rate remained strong at more than 80%. The new jobs market is behind the active construction pipeline. Year-to-date job growth in DFW remained strong this quarter at 2.7%, more than a full percentage above the state’s rate and nearly double that of the U.S., although Fort Worth’s growth continued to lag Dallas by more than half. Meanwhile, the Metroplex office asking rents rose 1.0% quarter-to-quarter and were up 8.2% year-over-year.

More than 6.7 million sq. ft. remained under construction as of Q4 2016 with 44.6% pre-leased, up 6.0% in the past 90 days with 24 of the 28 buildings underway being speculative. This construction activity is focused within Far North Dallas (mainly the Upper Tollway and Frisco), Uptown, and Las Colinas. These three submarkets accounted for 76.5% of the DFW market’s construction as of year-end. The largest of these projects is the 1.1 million sq. ft. Liberty Mutual Campus in Legacy West. Larger leases signed in Q4 2016 indicate forward-looking momentum for net absorption going into 2017. AmerisourceBergen, American Airlines, EPA and Occidental Petroleum each signed new leases for 100,000 sq. ft. or larger. The most active industries included the Professional & Business Services sector, Education & Health Services and Technology, with particularly strong activity within the Dallas CBD and Far North Dallas.


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Average Asking Lease Rate ($/SF) Under Construction

(MSF) Under Construction Average Asking Lease Rates

Vacancy Rate 18.6%

Avg. Asking Rate $23.86/SF

Net Absorption 699,158 SF

Completions 353,901 SF

Figure 1: Average Asking Lease Rate and Under Construction *Arrows indicate change from previous quarter.


MARKETVIEW

DALLAS / FORT WORTH OFFICE


Figure 2: Dallas Office Market Statistics


Submarket Net Total Total Average Q4 2016 Total YTD 2016 Total

Rentable Area Vacancy Availability Asking Net Absorption Net Absorption

(SF) (%) (%) Rate ($/SF/Yr) (SF) (SF)

Central Expressway 11,781,333 10.8 15.8 25.96 44,372 511,520

Class A 7,775,991 11.1 15.6 29.30 69,299 474,429

Class B 3,892,454 10.5 16.3 22.29 (23,069) 27,544

Dallas CBD 25,397,715 27.9 34.6 25.97 (57,503) (540,631)

Class A 20,233,741 29.9 36.6 27.82 (159,720) (676,511)

Class B 4,641,616 21.3 27.5 18.54 117,168 128,050

East Dallas 3,236,552 12.8 14.6 16.45 9,859 21,271

Class A 583,651 11.1 11.1 - 8,318 (4,166)

Class B 2,206,360 12.7 15.3 16.94 14,063 32,676

Far North Dallas 38,566,494 16.2 20.8 24.46 29,452 674,389

Class A 24,291,538 15.3 18.9 30.16 44,576 793,825

Class B 14,274,956 17.6 24.0 20.09 (15,124) (119,436)

Las Colinas 29,180,281 14.7 21.2 24.48 189,592 1,020,118

Class A 16,074,832 13.4 21.4 28.19 348,216 824,996

Class B 12,504,658 16.6 21.4 20.67 (158,771) 189,202

LBJ Freeway 19,257,473 24.1 28.3 18.95 84,548 575,981

Class A 10,408,036 24.9 29.3 21.93 29,301 150,216

Class B 8,663,068 23.4 27.5 16.95 53,969 409,478

Lewisville / Denton 4,426,602 9.2 18.1 22.46 (3,811) 269,254

Class A 324,964 - 75.1 26.00 - 80,964

Class B 3,994,928 10.1 13.7 21,41 (16,435) 176,302

Preston Center 3,989,556 10.7 16.8 36.53 (47,267) (3,828)

Class A 3,272,504 10.0 16.7 37.86 (44,520) 780

Class B 649,374 11.5 15.1 28.51 (4,102) 6,780

Richardson / Plano 21,352,657 18.9 23.8 22.63 393,067 1,787,495

Class A 10,007,730 16.4 21.5 24.65 189,721 1,246,54

Class B 11,013,129 21.7 26.3 21.46 189,721 483,915

Southwest Dallas 1,519,515 13.8 16.9 16.51 (5,806) (4,242)

Class A 280,729 5.5 7.3 21.50 - 2,903

Class B 1,053,132 17.5 21.2 15.69 (18,931) (30,818)

Stemmons Freeway 9,328,345 29.7 32.9 15.01 1,352 33,622

Class A 4,207,328 20.7 24.3 16.42 (20,121) (76,486)

Class B 4,610,383 37.6 40.4 13.36 (11,163) 83,152

Uptown / Turtle Creek 11,259,935 12.6 16.3 40.38 88,431 574,019

Class A 9,137,221 12.7 14.8 44.16 71,491 571,644

Class B 1,989,127 12.7 24.6 33.45 16,940 2,375

*Class C Statistics are included in the submarket totals, even though they are not broken out in table.

MARKETVIEW



Figure 3: Fort Worth and Total Office Market Statistics

Lease (Tenant) Building Name/Address Total SF

AmerisourceBergen The Offices at Austin Ranch 300,000

Environmental Protection Agency

Renaissance Tower 229,000

Goldman Sachs Trammell Crow Center 150,000

Sale (Buyer) Building Name/Address Total SF

Corporate Properties Trust State Farm Campus 2,262,902

Haberman Group Campbell Centre Complex 873,400

Parallel Capital Partners Urban Center 848,939

Figure 4: Top Leases / Top Sales of the Quarter



Figure 5: 2016 Signed Office Leases by Industry Type


31%

15% 9% 7%

17%

21%

Professional & Business Services Financial Activities

Manufacturing Retailers/Wholesalers

Education & Health Services All Others



(SF) (%) (%) Rate ($) (SF) (SF)

Fort Worth CBD 8,082,765 16.3 17.2 25.49 (11,422) (75,549)

Class A 5,779,611 18.0 16.5 29.23 (3,159) (7,457)

Class B 2,200,779 12.6 19.7 19.59 (8,263) (68,092)

Mid Cities 14,088,975 20.0 25.7 17.83 42,374 128,627

Class A 4,243,969 26.0 38.0 20.53 (3,658) 53,091

Class B 8,890,869 17.4 20.4 17.49 34,842 24,636

North Fort Worth 1,646,762 12.8 14.7 18.06 21,199 194,041

Class A 511,277 5.9 5.9 N/A 46,234 108,799

Class B 1,097,767 16.3 19.1 18.06 (25,035) 87,927

Northeast Fort Worth 2,883,153 56.5 58.9 19.27 (23,719) (18,522)

Class A 414,859 81.5 75.3 21.37 1,224 (7,407)

Class B 2,365,760 53.1 56.9 15.51 (11,863) 1,965

South Fort Worth 6,606,274 13.0 15.0 23.46 (55,560) 30,041

Class A 1,966,453 14.9 13.3 28.19 (14,822) 87,442

Class B 4,146,644 11.5 15.5 22.41 (40,738) (46,999)

Dallas Total 179,336,458 18.5 23.7 24.93 726,286 4,958,969

Class A 106,598,265 18.3 23.6 29.31 537,322 3,389,909

Class B 69,533,185 19.2 24.2 21.18 144,266 1,389,220

Fort Worth Total 33,307,929 19.2 23.8 20.40 (27,128) 258,638

Class A 12,916,169 19.8 24.6 25.27 25,819 234,468

Class B 18,701,819 17.1 23.8 18.80 (51,057) (563)

Metro Total 212,644,387 18.6 23.7 23.86 699,158 5,280,575

Class A 119,514,434 18.4 23.7 29.59 563,141 3,632,322

Class B 88,235,004 19.1 24.2 20.14 93,209 1,483,680


MARKETVIEW

Q4 2016 CBRE Research 4


$29.59

$20.14

15

20

25

30

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

Asking Rate ($/SF) Class A Class B

0200400600800

1,0001,2001,4001,6001,800

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

Sq. Ft. (000’s)

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,500

2009 2010 2011 2012 2013 2014 2015 YTD 2016

Sq. Ft. (000’s)

Market-wide availability increased by 100 basis points (bps) to 23.7% in Q4 2016. The total vacancy rate for the Metroplex rose slightly to 18.6%, showing an increase of 90 bps. Class A vacancy increased by 70 bps, totaling 18.4%. Class B vacancy increased 160 bps to 19.1%. Of the total amount of vacant space, 5.2% is attributed to sublease space, an increase of 30 bps quarter-over-quarter. Sublease availability represents 11% of all available space on the market, or 5.5 million sq. ft., a level that is considered normal for North Texas.

Class A gross asking rents experienced palpable growth over the past year by logging an increase of 10.4% since Q4 2015 and now averages $29.59 per sq. ft. The Class B average asking rate remained above the $20.00 per sq. ft. benchmark, rising by 4.8% over the same timeframe to $20.14 per sq. ft. Class C rents did not experience the same robust growth and actually fell 13.9% since Q4 2015 to sit at $13.07 per sq. ft.

For the 26th consecutive quarter, the DFW office market posted positive net absorption, totaling 699,158 sq. ft. for Q4 2016 and about 5.2 million sq. ft. year-to-date. Richardson/Plano outperformed all other submarkets in terms of net absorption, posting 393,067 sq. ft. for Q4 2016. Las Colinas was second posting 189,592 sq. ft. in net absorption. Although net absorption is slowing down, it has still remained positive, which is a good sign for DFW.

This is the first quarter in 2016 where less than five buildings delivered. There were four deliveries totaling 353,901 sq. ft. with a strong combined pre-leased rate of 80.6%. The largest of these deliveries was the OneSource Virtual headquarters within the Cypress Waters Office Park in Las Colinas. The other three deliveries were Class B buildings totaling 138,901 sq. ft. Two are located in Far North Dallas, while one is in Richardson/Plano. All 28 buildings currently under construction are Class A.

VACANCY & AVAILABILITY

LEASE RATES

NET ABSORPTION

CONSTRUCTION COMPLETIONS

Figure 8: Vacancy & Availability

Figure 6: Lease Rates

Figure 7: Total Net Absorption

Figure 9: Construction Completions

© 2017 CBRE, Inc. |





18.6%

23.7%

17

19

21

23

25

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

% Total Vacancy % Availability %

MARKETVIEW INSERT



Figure 1: Market Overview By Submarket and Class


Submarket Class Building

Count

Net Direct Direct Sublease Total Total Average Rentable Vacant Vacancy Available Available Availability Asking Gross

(SF) (SF) Rate (%) (SF) (SF) Rate (%) Rate ($/SF/Yr)

Central Expressway Class A 26 7,775,991 847,754 10.9 127,502 1,212,920 15.6 29.30

Class B 40 3,892,454 383,247 9.8 62,638 635,727 16.3 22.29

Class C 1 112,888 5,547 4.9 1,601 7,148 6.3 22.50

Dallas CBD Class A 21 20,233,741 5,767,819 28.5 482,668 7,412,694 36.6 27.82

Class B 26 4,641,616 983,922 21.2 92,941 1,278,154 27.5 18.54

Class C 8 522,358 42,384 8.1 8,788 84,793 16.2 15.63

East Dallas Class A 4 583,651 64,624 11.1 - 64,624 11.1 N/A

Class B 40 2,206,360 269,826 12.2 20,528 336,970 15.3 16.94

Class C 11 446,541 70,541 15.8 - 70,541 15.8 13.29

Far North Dallas Class A 125 24,291,538 3,314,071 13.6 1,049,774 4,603,066 18.9 30.16

Class B 189 14,274,956 2,433,572 17.0 396,764 3,426,947 24.0 20.09

Class C - - - - - - - N/A

Las Colinas Class A 66 16,074,832 1,779,551 11.1 763,408 3,444,093 21.4 28.19

Class B 121 12,504,658 2,051,405 16.4 97,963 2,670,015 21.4 20.67

Class C 6 600,791 55,527 9.2 5,000 70,422 11.7 16.02

LBJ Freeway Class A 33 10,408,036 2,499,354 24.0 332,662 3,048,794 29.3 21.93

Class B 90 8,663,068 1,963,481 22.7 167,839 2,384,563 27.5 16.95

Class C 5 186,369 14,441 7.7 7,758 25,634 13.8 12.58

Lewisville/Denton Class A 3 324,964 - - - 244,000 75.1 26.00

Class B 44 3,994,928 317,159 7.9 146,050 548,286 13.7 17.71

Class C 3 106,710 3,144 2.9 - 7,950 7.5 16.00

Preston Center Class A 20 3,272,504 305,056 9.3 105,237 547,598 16.7 37.86

Class B 10 649,374 71,610 11.0 2,984 98,297 15.1 28.51

Class C 2 67,678 23,381 34.5 - 23,381 34.8 25.00

Richardson/Plano Class A 47 10,007,730 1,575,339 15.7 275,770 2,153,702 21.5 24.65

Class B 136 11,053,129 2,374,709 21.5 102,157 2,906,672 26.3 21.46

Class C 8 331,798 2,834 0.9 - 38,198 11.5 15.35

SW Dallas Class A 2 280,729 15,500 5.5 5,000 20,500 7.3 21.50

Class B 16 1,053,132 184,788 17.5 - 222,946 21.2 15.69

Class C 3 185,654 9,000 4.8 - 13,420 7.2 N/A

Stemmons Freeway Class A 10 4,207,328 866,869 20.6 15,555 1,021,057 24.3 16.42

Class B 40 4,610,383 1,672,187 36.3 108,028 1,864,203 40.4 13.36

Class C 11 510,634 167,717 32.8 - 186,874 36.6 12.06

Uptown/Turtle Creek Class A 39 9,137,221 1,087,700 11.9 194,220 1,351,475 14.8 44.16

Class B 26 1,989,127 248,085 12.5 145,672 488,507 24.6 33.45

Class C 2 133,587 - - - - - N/A

Fort Worth CBD Class A 16 5,779,611 846,333 14.6 194,162 955,512 16.5 29.23

Class B 15 2,200,779 237,800 10.8 39,878 432,610 19.7 19.59

Class C 3 102,375 - - - - - N/A

Mid Cities Class A 31 4,243,969 961,285 22.7 142,170 1,614,303 38.0 20.53

Class B 114 8,890,869 1,460,497 16.4 88,261 1,816,538 20.4 17.49

Class C 19 954,137 162,104 17.0 - 184,732 19.4 13.16

North Fort Worth Class A 2 511,277 25,026 4.9 5,000 30,026 5.9 N/A

Class B 12 1,097,767 66,476 6.1 112,091 209,163 19.1 18.06

Class C 1 37,718 2,685 - - 2,685 7.1 N/A

NE Fort Worth Class A 2 414,859 338,017 81.5 5,000 312,531 75.3 21.37

Class B 21 2,365,760 1,237,849 52.3 71,856 1,344,985 56.9 15.51

Class C 2 102,534 34,499 33.6 - 34,499 38.5 N/A

South Fort Worth Class A 13 1,966,453 227,711 11.6 65,685 261,693 13.3 28.19

Class B 51 4,146,644 388,385 9.4 89,237 644,643 15.5 22.41

Class C 10 493,177 85,050 17.2 - 85,050 17.2 16.37

Dallas Total Class A 396 106,598,265 18,123,637 17.0 3,351,796 25,124,523 23.6 29.31

Class B 778 69,533,185 12,953,991 18.6 1,343,564 16,861,287 24.2 21.18

Class C 60 3,205,008 394,516 12.3 23,147 528,361 16.5 13.43

Fort Worth Total Class A 64 12,916,169 2,398,372 18.6 412,017 3,174,065 24.6 25.27

Class B 213 18,701,819 3,391,007 18.1 401,323 4,447,939 23.8 19.52

Class C 34 1,689,941 284,338 16.8 - 311,966 18.5 13.23

DFW Total Class A 460 119,514,434 20,522,009 17.2 3,763,813 28,298,588 23.7 29.59

Class B 991 88,235,004 16,344,998 18.5 1,744,887 21,309,226 24.2 20.14

Class C 94 4,894,949 678,854 13.9 23,147 840,327 17.2 13.07

MARKETVIEW INSERT



Source: CBRE Research, Q4 2016. .

Figure 2: Absorption and Construction

Submarket

Qtr YTD 2016 Under Under Delivered Qtr Delivered Total Net Total Net Construction Construction Construction Construction

Absorption (SF) Absorption (SF) Building Count (SF) Building Count (SF)

Central Expressway Class A 69,299 474,429 - - - -

Class B (23,069) 27,544 - - - -

Class C (1,858) 9,547 - - - -

Dallas CBD Class A (159,720) (676,511) 2 342,879 - -

Class B 117,168 128,050 - - - -

Class C (14,951) 7,830 - - - -

East Dallas Class A 8,318 (4,166) - - - -

Class B 14,063 32,676 - - - -

Class C (12,522) (7,239) - - - -

Far North Dallas Class A 44,576 793,825 10 2,969,401 - -

Class B (15,124) (119,436) - - 2 80,000

Class C - - - - - -

Las Colinas Class A 348,216 824,996 4 785,402 1 215,000

Class B (158,771) 189,202 - - - -

Class C 147 5,920 - - - -

LBJ Freeway Class A 29,301 150,216 - - - -

Class B 53,969 409,478 - - - -

Class C 1,278 16,287 - - - -

Lewisville/Denton Class A - 80,964 - - - -

Class B (16,435) 176,302 - - - -

Class C 12,624 11,988 - - - -

Preston Center Class A (44,520) 780 1 171,583 - -

Class B (4,102) 6,780 - - - -

Class C 1,355 (11,388) - - - -

Richardson/Plano Class A 190,482 1,247,315 2 348,441 - -

Class B 189,721 483,915 - - 1 58,901

Class C 12,864 56,266 - - - -

SW Dallas Class A - 2,903 - - - -

Class B (18,931) (30,818) - - - -

Class C 13,125 23,673 - - - -

Stemmons Freeway Class A (20,121) (76,486) - - - -

Class B (11,163) 83,152 - - - -

Class C 32,636 26,956 - - - -

Uptown/Turtle Creek Class A 71,491 571,644 5 1,500,471 - -

Class B 16,940 2,375 - - - -

Class C - - - - - -

-

Fort Worth CBD Class A (3,159) (7,457) 1 280,489 - -

Class B (8,263) (68,092) - - - -

Class C - - - - - -

Mid Cities Class A (3,658) 53,091 1 160,000 - -

Class B 34,842 24,636 - - - -

Class C 11,190 50,900 - - - -

North Fort Worth Class A 46,234 108,799 - - - -

Class B (25,035) 87,927 - - - -

Class C - (2,685) - - - -

NE Fort Worth Class A 1,224 (7,407) - - - -

Class B (11,863) 1,965 - - - -

Class C (13,080) (13,080) - - - -

South Fort Worth Class A (14,822) 87,442 2 160,182 - -

Class B (40,738) (46,999) - - - -

Class C - (10,402) - - - -

Dallas Total Class A 537,322 3,397,854 24 6,118,177 1 215,000

Class B 144,266 1,484,243 - - 3 138,901

Class C 44,698 139,840 - - - -

Fort Worth Total Class A 25,819 234,468 4 600,671 - -

Class B (51,057) (563) - - - -

Class C (1,890) 24,733 - - - -

DFW Total Class A 317,651 3,378,887 28 6,718,848 1 215,000

Class B 93,209 1,388,657 - - 3 138,901

Class C 42,808 164,573 - - - -

MARKETVIEW INSERT

$29.59

$20.14

$13.07

10

15

20

25

30

Q1 2

014

Q2 2

014

Q3 2

014

Q4 2

014

Q1 2

015

Q2 2

015

Q3 2

015

Q4 2

015

Q1 2

016

Q2 2

016

Q3 2

016

Q4 2

016

Asking Rate ($/SF) Class A Class B Class C

Figure 3: Average Asking Rates

1.7M

699K

18.6%

16

17

18

19

20

21

0

500

1,000

1,500

2,000

Q1 2

014

Q2 2

014

Q3 2

014

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014

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015

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015

Q3 2

015

Q4 2

015

Q1 2

016

Q2 2

016

Q3 2

016

Q4 2

016

Vacancy (%) Sq. Ft. (000’s) Net Absorption Vacancy

Figure 4: Net Absorption and Vacancy

Tenant Property Name/Address Total SF Class Lease Type Submarket

AmerisourceBergen The Offices at Austin Ranch 300,000 A New Lease Far North Dallas

Environmental Protection Agency Renaissance Tower 229,000 A New Lease Dallas CBD

Goldman Sachs Trammell Crow Center 150,000 A New Lease Dallas CBD

Occidental Petroleum Fourteen555 120,000 A New Lease LBJ Freeway

Gardere Wynne Sewell LLP McKinney & Olive 115,000 A New Lease Uptown/Turtle Creek

Figure 5: Significant Lease Transactions of the Quarter

Buyer Property Name/Address Total SF $/PSF Class Submarket

Transwestern/Mirae Asset Financial State Farm Headquarters 2,262,902 $363 A Richardson/Plano

Parallel Capital Partners Urban Towers 844,239 - A Las Colinas

Intercontinental RE Legacy Tower 342,000 - A Far North Dallas

Intercontinental RE/JV Foundry Commercial

8080 NCX 283,707 - A Central Expressway

Figure 6: Significant Sale Transactions of the Quarter

Source: Real Capital Analytics, CBRE Research, Q4 2016.


Source: CBRE Research, Q4 2016. Source: CBRE Research, Q4 2016.




MARKETVIEW INSERT

CONTACTS

CBRE OFFICES


Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross and/or Full Service Gross, dependent upon Submarket. Availability All existing space being marketed for lease. Total Vacancy Rate Direct Vacancy + Sublease Vacancy. CBD Central Business District; consists of Dallas’ Central Business District only.

CBRE’s market report analyzes existing single- and multi-tenant office buildings that total 30,000+ sq. ft. in Dallas / Fort Worth, excluding owner-occupied buildings. CBRE assembles all information through telephone canvassing, third-party vendors, and listings received from owners, tenants and members of the commercial real estate brokerage community.

SURVEY CRITERIA

DEFINITIONS





SURVEY CRITERIA

DEFINITIONS


CBRE OFFICES

CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201

CBRE Houston 2800 Post Oak, Suite 2300 Houston, TX 77056

CONTACTS

Robert C. Kramp Director, Research & Analysis [email protected] E. Michelle Miller Research Operations Manager [email protected]

Lauren Paris Senior Research Analyst +1 214 979 6587 [email protected] Alex Stewart Research Coordinator +1 214 979 6530 [email protected]

MARKETVIEW

Still on the rise; office construction at a five year high


Growth in the Dallas/Fort Worth office market shows no signs of slowing down with the construction pipeline at a five year high. This growth is boosted by an employment creation rate that continues to outperform the state as a whole according to The Federal Reserve Bank of Dallas. Job growth in Dallas was an impressive 5.3% year-over-year in August while Fort Worth trailed at 1.1% in the same month. Although Fort Worth continues to lag in growth compared to Dallas, the overall Metroplex commercial real estate market remains on an upward path. The average metro-wide quoted lease rate fell 0.8% from last quarter, but is still up 9.4% year-over-year. Construction volume in DFW has been on a continuous rise for the past year. This quarter proved to be no different with more than eight million sq. ft. of construction in the pipeline.

Of the 8,081,805 sf. ft. under construction, 36.5% is pre-leased. The majority of the 30 buildings under construction are speculative developments, with only five being build-to-suit. This construction activity is focused within Far North Dallas (particularly the Upper Tollway and Frisco), Uptown and Las Colinas; these three submarkets account for almost 70% of the DFW market’s construction underway. The largest of these projects with 552,883 sq. ft. is Wade Park, which is scheduled to deliver by the end of the year. Dallas has proven to be a key market in the U.S. with an influx corporate relocations to Dallas within the past few years such as Toyota and State Farm. The sustained market improvements continue to attract national and global companies. All market indications show that DFW’s momentum will not slow down anytime soon.


16

18

20

22

24

0

1

2

3

4

5

6

7

8

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Average Asking Lease Rate ($/SF)

Sq. Ft. Under Construction (Millions) Under Construction Average Asking Lease Rates

Vacancy Rate 17.5%


Net Absorption 1,711,110 SF

Completions 1,290,880 SF



MARKETVIEW







(SF) (%) (%) Rate ($/SF/Yr) (SF) (SF)


Class A 7,617,634 12.1 15.4 29.02 132,205 405,130

Class B 3,929,682 9.9 14.3 23.16 (2,865) 50,613

Dallas CBD 25,511,315 26.5 35.3 25.43 (244,190) (503,128)

Class A 20,233,604 27.8 37.7 27.07 (228,425) (516,791)

Class B 4,641,616 23.8 28.2 18.51 (9,744) 10,882

East Dallas 3,725,595 12.5 14.7 16.77 12,253 11,412

Class A 583,651 12.5 14.1 34.00 - (12,484)

Class B 2,633,403 12.7 15.2 16.29 14,054 18,613

Far North Dallas 40,833,607 12.5 14.7 24.23 116,292 644,937

Class A 26,077,135 12.5 14.1 30.02 414,577 749,249

Class B 14,756,472 12.7 15.2 19.96 (298,285) (104,312)

Las Colinas 29,938,141 14.4 20.0 24.11 356,518 830,526

Class A 16,179,606 14.4 20.0 27.40 233,039 476,780

Class B 13,006,670 14.7 20.6 20.98 121,292 347,973

LBJ Freeway 19,511,576 23.9 28.0 18.87 347,151 433,178

Class A 10,410,777 24.6 29.0 21.49 110,667 191,454

Class B 8,914,430 23.4 27.1 17.24 235,079 241,597

Lewisville / Denton 4,671,318 12.4 18.2 20.15 58,255 170,136

Class A 324,964 - 75.1 26.00 (70,539) 10,425

Class B 4,159,008 12.9 13.6 19.49 113,912 144,829

Preston Center 3,979,643 9.5 16.5 34.73 62,546 43,439

Class A 3,262,591 8.7 16.5 37.03 64,777 45,300

Class B 649,374 10.9 14.3 28.70 (2,231) 10,882


Class A 11,087,229 12.4 19.7 24.70 367,062 1,056,833

Class B 12,520,841 20.2 23.7 21.56 56,632 294,194

Southwest Dallas 1,706,268 11.9 13.6 16.11 (1,995) 1,564

Class A 280,729 5.5 7.3 21.50 - 2,903

Class B 1,184,627 14.0 16.0 15.25 (1,995) (11,887)


Class A 3,907,347 21.7 26.5 16.62 (57,153) (48,420)

Class B 5,114,105 31.6 35.1 13.54 78,015 189,338


Class A 9,094,731 13.3 16.2 44.16 429,613 500,153

Class B 2,035,476 13.2 25.8 33.36 (65,400) (14,565)


MARKETVIEW




Lease (Tenant) Building Name/Address Total SF

Caliber Home Loans Point West I 182,700

Texas Health Resources 500 East Border St 123,770

The Charter School Fund 6361 Grapevine Hwy 102,000

Sale (Buyer) Building Name/Address Total SF

Fortis Property Group 2200 Ross Ave 1,248,230

Mesirow Financial Verizon Campus 1,150,000

Metzler 2000 McKinney 447,595






30%

20% 11%

9%

15%

15%






(SF) (%) (%) Rate ($) (SF) (SF)

Fort Worth CBD 9,365,503 11.5 15.0 25.38 50,316 (64,127)

Class A 5,914,246 13.4 16.7 29.11 79,349 (4,298)

Class B 3,184,582 7.8 11.9 19.58 (29,033) (59,829)

Mid Cities 15,268,833 17.5 24.1 17.98 46,626 86,253

Class A 4,628,874 22.9 36.5 20.49 46,437 56,749

Class B 9,143,342 15.5 19.5 17.50 (32,510) (10,206)

North Fort Worth 1,646,762 8.7 13.5 18.11 38,739 172,842

Class A 511,277 13.9 5.7 N/A 48,283 62,565

Class B 1,097,767 6.4 17.3 18.11 (9,544) 112,962

Northeast Fort Worth 2,517,953 46.6 52.6 19.39 19 5,197

Class A 403,938 84.0 85.2 21.37 - (8,631)

Class B 1,979,027 41.1 48.2 16.14 19 13,828

South Fort Worth 7,124,870 10.2 15.8 23.41 91,963 85,601

Class A 2,003,253 11.8 17.1 28.30 53,090 102,264

Class B 4,463,917 9.0 15.6 22.13 34,225 (6,261)

Dallas Total 186,416,704 17.7 22.9 23.41 1,649,414 4,461,618

Class A 109,059,998 17.5 23.1 28.30 1,395,823 2,971,199

Class B 73,545,704 18.2 22.8 22.13 238,464 1,413,236

Fort Worth Total 35,923,921 16.1 21.6 20.42 227,663 58,103

Class A 13,461,588 18.6 25.3 24.69 227,159 (18,510)

Class B 19,868,635 14.9 20.2 18.63 (36,843) 50,494

Metro Total 222,340,625 17.5 22.7 23.20 1,711,110 4,581,417

Class A 122,521,586 17.7 23.3 29.43 1,512,315 3,069,181

Class B 93,414,339 17.5 22.3 20.18 128,362 1,390,471


MARKETVIEW



$29.43

$20.18

15

20

25

30

Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016


0200400600800

1,0001,2001,4001,6001,800

Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Sq. Ft. (000’s)

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,500

2009 2010 2011 2012 2013 2014 2015 YTD 2016

Sq. Ft. (000’s)

Market-wide availability continued to decrease by 60 basis points (bps) to 22.7% in Q3 2016, a forward-looking indication that considerable net absorption is expected to commence in the coming quarters. The total vacancy rate for the Metroplex remained 17.5%, showing no change from last quarter. The Class A vacancy increased by 20 bps, while Class B decreased by 30 since Q2 2016. Of the total amount of vacant space in the market, less than 5% is attributed to sublease space, an increase of 90 bps quarter-over-quarter. Sublease availability represents 10.6% of all available space on the market, or 5.35 million sq. ft., a level that is considered normal for North Texas.

Class A gross asking rents experienced palpable growth over the past year by logging an increase of 11.29% since Q3 2015 and now averages $29.43 per sq. ft. The Class B average asking rate broke the $20.00 per sq. ft. ceiling, rising by 8.2% over the same timeframe to $20.18 per sq. ft. Class C rents experienced a 4.2% growth as well ending the quarter at $14.04 per sq. ft.

For the 25th consecutive quarter, the DFW office market posted positive net absorption, totaling 1.7 million sq. ft. for Q3 2016 and about 4.5 million sq. ft. year-to-date. Richardson/Plano outperformed all other submarkets in terms of net absorption, posting 429,445 sq. ft. for the quarter, while Uptown/Turtle Creek and Las Colinas logged a significant amount of net move-ins as well, proving that growth in the DFW metro is not centralized in one specific area.

Similar to last quarter, there were five office projects that delivered in Q3 2016, all of which were Class A, totaling just under 1.3 million sq. ft. of new inventory and a strong combined pre-leased rate of 75%. The largest of these deliveries included the 530,000-sq. ft. McKinney & Olive in Uptown, the 250,000-sq.ft. Alcatel-Lucent Regional Headquarters in Plano, and the 197,740-sq. ft. Tollway Center in Far North Dallas.


LEASE RATES

NET ABSORPTION




Figure 7: Total Net Absorption


© 2016 CBRE, Inc. |





17.5%

22.7%

17

19

21

23

25

Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016






SURVEY CRITERIA

DEFINITIONS


CBRE OFFICES



CONTACTS



MARKETVIEW

Going up: rents and construction continue upward trajectory


While other parts of the region are contracting, Dallas/Fort Worth is still exhibiting signs of expansion, given the 3.6% year-over-year employment growth (120,000 jobs added), rising rents and new groundbreakings. While the metro-wide quoted lease rate average has broken the $23.00 per sq. ft. mark, Dallas remains more affordable than many other major office markets in the country and even within the state.

The construction pipeline continues to expand even with the continued roll-out of deliveries. More than 900,000 sq. ft. between six projects broke ground over the quarter, bringing the active construction total to 7.5 million sq. ft. with approximately 51.8% already pre-committed. This activity is focused within Far North Dallas (particularly the Upper Tollway and Frisco), Uptown and Richardson; these three submarkets account for 70% of the DFW market’s construction underway. The largest of these projects is McKinney & Olive, which will deliver in Q3 2016 and is about

90% pre-leased, Park District, which broke ground last quarter after PricewaterhouseCoopers signed a 200,000-sq. ft. lease, and Liberty Mutual’s twin-tower build-to-suit (BTS) complex in Legacy West. Removing all BTS projects from the pipeline, the remaining speculative developments under construction at mid-year were 37% pre-leased. Although owner-occupied projects are excluded from the CBRE Research tracked set, it is important to note that there are currently seven such projects comprised of 2.7 million sq. ft. under construction throughout the Metroplex, making the total office owned and leased pipeline 10.2 million sq. ft. and comparable to current activity in Manhattan, which had 11.4 million sq. ft. of major projects underway at mid-year. Clearly, the rise in building material costs and shortage of construction labor are not translating into a lull in projects underway. Dallas/Fort Worth labor rates are more cost-efficient than the national counterpart, at 68% of the U.S. average according to RSMeans.


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Vacancy Rate 17.5%



Completions 694,382 SF



MARKETVIEW





Submarket Net Total Total Average Q2 2016 YTD 2016 Total

Rentable Area Vacancy Availability Asking Net Net Absorption

(SF) (%) (%) Rate ($/SF/Yr) Absorption (SF)


Class A 7,617,574 13.9 17.4 27.94 105,797 272,925

Class B 3,997,682 11.3 18.3 22.15 48,105 53,478

Dallas CBD 25,507,671 25.6 35.5 25.28 (144,664) (258,938)

Class A 20,229,960 26.7 37.9 26.93 (147,854) (288,366)

Class B 4,584,016 23.9 27.5 18.60 (15,303) 20,626

East Dallas 3,725,595 12.8 14.6 17.25 4,922 (841)

Class A 583,651 12.5 14.1 34.00 (15,903) (12,484)

Class B 2,633,403 13.2 15.2 17.09 16,155 4,559

Far North Dallas 40,494,143 14.8 19.3 24.67 459,724 528,645

Class A 24,996,767 14.6 18.7 30.68 200,871 334,672

Class B 15,247,376 15.4 20.7 19.92 258,853 193,973

Las Colinas 30,047,878 15.5 21.3 24.00 50,119 474,008

Class A 16,267,139 15.8 20.6 27.35 (143,169) 243,741

Class B 13,028,874 15.6 22.7 20.90 189,597 226,681

LBJ Freeway 19,733,104 24.0 28.9 18.60 347,151 433,178

Class A 10,404,414 24.0 30.1 21.11 110,667 191,454

Class B 9,142,321 24.3 28.0 16.97 235,079 241,597


Class A 324,964 - 75.1 26.00 80,964 80,964

Class B 4,159,008 12.9 13.6 19.49 14,714 30,917

Preston Center 3,979,643 11.1 15.7 32.90 (12,921) (19,107)

Class A 3,262,591 10.7 15.5 36.99 (26,695) (19,477)

Class B 649,374 10.5 14.2 28.21 15,129 13,113

Richardson / Plano 23,890,938 16.9 21.5 22.38 (6,366) 964,984

Class A 11,338,210 13.2 18.1 24.42 (904) 689,771

Class B 12,252,930 20.5 24.5 21.53 (9,026) 237,562

Southwest Dallas 1,706,268 11.8 13.5 16.27 27,969 3,559

Class A 280,729 5.5 7.3 21.50 - 2,903

Class B 1,184,627 13.8 15.9 15.51 17,421 (9,892)


Class A 3,458,586 18.3 22.1 16.00 7,945 8,733

Class B 5,888,728 33.9 40.8 14.66 95,023 111,323


Class A 8,424,890 10.4 17.1 43.04 40,386 70,540

Class B 2,081,406 10.2 25.1 34.43 (11,720) 50,835


MARKETVIEW




Lease (Tenant) Building Name Total SF

Zale Corp. Cypress Waters 256,000

Flagship Mortgage 4600 Regent Blvd 100,000

Atos SE Connection Park I 100,000

Sale (Buyer) Building Name Total SF

Hanwha Life KPMG Plaza 474,000

Fine Line Diversified Development Overton Centre 447,917

DISD 9400 NCX 387,617






28%

16%

13% 11%

11%

21%




Submarket Net Total Total Average Q2 2016 YTD 2016 Total

Rentable Area Vacancy Availability Asking Net Net Absorption

(SF) (%) (%) Rate ($) Absorption (SF)

Fort Worth CBD 9,365,503 11.8 15.5 25.46 (40,558) (114,443)

Class A 5,914,246 14.5 17.9 29.38 (37,914) (83,647)

Class B 3,184,582 6.7 11.3 19.16 (2,644) (30,796)

Mid Cities 15,227,919 17.6 24.2 17.12 58,027 39,627

Class A 4,590,874 23.3 36.3 20.20 23,546 10,312

Class B 9,140,428 15.2 19.5 17.20 33,269 22,304

North Fort Worth 1,686,762 10.8 17.4 19.18 58,446 134,103

Class A 511,277 23.4 17.5 N/A 14,282 14,282

Class B 1,137,767 5.3 17.8 19.18 46,849 122,506

Northeast Fort Worth 2,520,075 46.6 53.0 19.39 8,874 5,178

Class A 403,938 84.0 85.2 21.38 (8,631) (8,631)

Class B 1,981,149 41.0 48.7 16.11 17,505 13,809

South Fort Worth 6,977,408 9.2 16.3 22.31 82,168 (6,362)

Class A 1,832,271 6.5 12.0 27.18 73,615 49,174

Class B 4,487,437 9.7 18.4 21.74 (8,207) (40,486)

Dallas Total 186,239,017 17.8 23.6 23.61 1,118,530 2,812,204

Class A 107,189,475 17.4 23.6 28.81 212,105 1,575,376

Class B 74,849,745 18.7 23.8 20.01 854,027 1,174,772

Fort Worth Total 35,777,667 16.2 22.1 20.47 166,957 58,103

Class A 13,252,606 18.9 25.5 24.45 64,898 (18,510)

Class B 19,931,363 14.6 20.7 18.77 86,772 87,337

Metro Total 222,016,684 17.5 23.3 23.40 1,285,487 2,870,307

Class A 120,442,081 17.5 23.8 29.33 277,003 1,556,866

Class B 94,781,108 17.8 23.2 19.39 940,799 1,262,109


MARKETVIEW



$29.33

$19.39

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Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016


0200400600800

1,0001,2001,4001,6001,800

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0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,500

2009 2010 2011 2012 2013 2014 2015 YTD 2016

Sq. Ft. (000’s)

Market-wide availability decreased by 40 basis points (bps) to 23.3% year-over-year in Q2 2016, a forward-looking indication that considerable net absorption is expected to commence in the coming quarters. The total vacancy rate decreased year-over-year by 60 bps to 17.5%, dipping back down after a slight increase during Q1 2016. Of the total amount of vacant space in the market, only 4.0% is attributed to sublease space, a noteworthy decrease of 70 bps quarter-over-quarter. Sublease availability represents 10.2% of all available space on the market, or 5.3 million sq. ft., a level that is considered to be within the market norm for North Texas.

Class A gross asking rents continued to experience growth in Q2 2016, logging a 1.1% increase since Q2 2015 and now sits at $29.33 per sq. ft. Class B average asking rents experienced more pronounced rent growth this quarter, rising by 4.5% over the same timeframe to $19.39 per sq. ft., albeit slightly down from the previous quarter.

For the 24th consecutive quarter, DFW posted positive net absorption, totaling 1,285,487 sq. ft. for Q2 2016 and about 2.9 million sq. ft. year-to-date. Far North Dallas continued to outperform all other submarkets in terms of net absorption, posting 460,000 sq. ft. over the quarter, while the LBJ Freeway and Central Expressway corridors logged a significant amount of net move-ins as well, an indication that demand from Uptown and the Tollway, respectively, may be bleeding into adjacent areas as availability dwindles and/or some users are being priced out of higher-rent submarkets.

Similar to last quarter, there were five office projects that delivered in Q2 2016, all of which were Class A, totaling just under 700,000 sq. ft. of new inventory and a combined preleased rate of 22%. The largest of these deliveries included the 400,000-sq. ft. The Star in Frisco, Allen Place I with 102,357 sq. ft. in Allen, and the 101,608-sq. ft. Parkside on Legacy in Plano. Two smaller projects, one speculative and one BTS, delivered in South Fort Worth.


LEASE RATES

NET ABSORPTION




Figure 6: Net Absorption


© 2016 CBRE, Inc. |





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MARKETVIEW INSERT



Figure 1: Market Overview By Submarket and Class Dallas/Fort Worth Office, Q2 2016

Submarket Class Building

Count

Net Direct Direct Sublease Total Total Average Rentable Vacant Vacancy Available Available Availability Asking Gross

(SF) (SF) Rate (%) (SF) (SF) Rate (%) Rate ($/SF/Yr) Central Expressway Class A 26 7,617,574 1,057,465 13.9 91,551 1,323,135 17.4 27.94

Class B 42 3,997,682 452,610 11.3 78,513 731,575 18.3 22.15 Class C 1 112,888 6,014 5.3 1,601 9,425 8.3 22.50

Dallas CBD Class A 21 20,229,960 5,188,289 25.6 396,245 7,666,308 37.9 26.93 Class B 25 4,584,016 1,087,752 23.7 27,442 1,260,232 27.5 18.60 Class C 10 693,695 34,754 5.0 40,430 120,578 17.4 15.86

East Dallas Class A 4 583,651 72,942 12.5 - 82,202 14.1 N/A Class B 46 2,633,403 330,605 12.6 30,575 400,197 15.2 17.09 Class C 13 508,541 56,218 11.1 - 62,509 12.3 13.29

Far North Dallas Class A 124 24,996,767 3,478,778 13.9 852,986 4,668,813 18.7 30.68 Class B 202 15,247,376 2,338,824 15.3 305,891 3,153,461 20.7 19.92 Class C 1 250,000 - - - - - N/A

Las Colinas Class A 67 16,267,139 2,160,477 13.3 715,660 3,352,218 20.6 27.35 Class B 126 13,028,874 2,019,314 15.5 71,435 2,954,261 22.7 20.90 Class C 7 751,865 62,861 8.4 6,325 6,325 10.5 15.72

LBJ Freeway Class A 33 10,404,414 2,432,806 23.4 290,161 3,129,084 30.1 21.11 Class B 93 9,142,321 2,174,060 23.8 118,463 2,559,957 28.0 16.97 Class C 5 186,369 30,601 16.4 7,758 23,109 12.4 11.60

Lewisville/Denton Class A 3 324,964 - N/A - 244,000 75.1 26.00 Class B 46 4,159,008 451,737 10.9 84,885 564,821 13.6 19.49 Class C 5 187,346 42,853 22.9 - 42,853 22.9 16.00

Preston Center Class A 20 3,262,591 331,278 10.2 90,408 506,000 15.5 36.99 Class B 10 649,374 68,261 10.5 - 92,105 14.2 28.21 Class C 2 67,678 24,736 36.5 - 24,886 36.8 25.00

Richardson/Plano Class A 50 11,338,210 1,451,243 12.8 244,183 2,508,804 18.1 24.42 Class B 138 12,252,930 2,480,127 20.2 146,908 3,003,794 24.5 21.53 Class C 7 299,798 21,449 7.2 - 83,706 27.9 13.99

SW Dallas Class A 2 280,729 15,500 5.5 5,000 20,500 7.3 21.50 Class B 19 1,184,627 163,862 13.8 - 187,822 15.9 15.51 Class C 4 240,912 22,125 9.2 - 22,125 9.2 15.00

Stemmons Freeway Class A 9 3,458,586 631,743 18.3 5,290 763,225 22.1 16.00 Class B 49 5,888,728 1,937,467 32.9 283,984 2,399,728 40.8 14.66 Class C 15 767,118 299,748 39.1 - 321,955 42.0 12.20

Uptown/Turtle Creek Class A 37 8,424,890 842,694 10.0 241,002 1,443,829 17.1 43.04 Class B 28 2,081,406 210,271 10.1 169,531 522,714 25.1 34.43 Class C 2 133,587 - - - - - N/A

Fort Worth CBD Class A 17 5,914,246 825,901 14.0 216,971 1,058,380 17.9 29.38 Class B 18 3,184,582 213,183 6.7 47,703 358,648 11.3 19.16 Class C 5 266,675 38,000 14.2 - 38,000 14.2 N/A

Mid Cities Class A 31 4,590,874 956,872 20.8 148,987 1,668,126 36.3 20.20 Class B 118 9,140,428 1,341,798 14.7 85,547 1,780,984 19.5 17.20 Class C 24 1,496,617 218,780 14.6 - 241,540 16.1 12.74

North Fort Worth Class A 2 511,277 119,543 23.4 5,000 89,365 17.5 N/A Class B 13 1,137,767 35,331 3.1 114,400 202,227 17.8 19.18 Class C 1 37,718 2,685 7.1 - 2,684 7.1 N/A

NE Fort Worth Class A 2 403,938 339,241 84.0 5,000 344,241 85.2 21.38 Class B 21 1,981,149 794,426 41.0 138,344 963,881 48.7 16.11 Class C 2 134,988 21,419 15.9 - 26,419 19.6 N/A

South Fort Worth Class A 13 1,832,271 113,208 6.2 57,932 219,565 12.0 27.18 Class B 56 4,487,437 411,278 9.2 145,794 824,929 18.4 21.74 Class C 14 657,700 89,698 13.6 - 93,733 14.3 16.42

Dallas Total Class A 396 107,189,475 17,647,140 16.5 2,932,486 25,255,783 23.6 28.39 Class B 824 74,849,745 13,701,737 18.3 1,348,327 17,830,667 23.8 20.81 Class C 72 4,199,797 599,758 14.3 56,114 790,227 18.8 15.58

Fort Worth Total Class A 65 13,252,606 2,354,765 17.8 433,890 3,379,677 25.5 20.89 Class B 226 19,931,363 2,796,016 14.0 531,788 4,130,669 20.7 18.50 Class C 46 2,593,698 370,582 14.3 - 402,377 15.5 10.35

DFW Total Class A 461 120,442,081 20,001,905 16.6 3,366,376 28,635,460 23.8 29.33 Class B 1,050 94,781,108 16,497,753 17.4 1,880,115 21,961,336 23.2 19.39 Class C 118 6,793,495 970,340 14.3 56,114 1,192,604 17.6 13.96

NEW! Additional Insert by Submarket and Class from CBRE

MARKETVIEW INSERT



Source: CBRE Research, Q2 2016. .

Figure 2: Absorption and Construction

Submarket Qtr YTD 2016 Under Under Delivered Delivered Total Net Total Net Construction Construction Construction Construction Absorption (SF) Absorption (SF) Building Count (SF) Building Count (SF)

Central Expressway Class A 105,797 272,925 - - - - Class B 48,105 53,478 - - - -

Class C 11,381 10,681 - - - - Dallas CBD Class A (147,854) (288,366) 2 342,879 - - Class B (15,303) 20,626 - - - - Class C 18,493 8,802 - - - - East Dallas Class A (15,903) (12,484) - - - -

Class B 16,155 4,559 - - - - Class C 4,670 7,084 - - - - Far North Dallas Class A 200,871 334,672 8 2,693,848 2 500,377 Class B 258,853 193,973 2 80,000 - - Class C - - - - - - Las Colinas Class A (143,169) 243,741 4 900,402 - -

Class B 189,597 226,681 1 100,000 - - Class C 3,691 3,586 - - - - LBJ Freeway Class A 110,667 191,454 - - - - Class B 235,079 241,597 - - - - Class C 1,405 127 - - - - Lewisville/Denton Class A 80,964 80,964 - - - -

Class B 14,714 30,917 - - - - Class C - - - - - - Preston Center Class A (26,695) (19,477) 1 186,257 - - Class B 15,129 13,113 - - - - Class C (1,355) (12,743) - - - - Richardson/Plano Class A (904) 689,771 2 550,000 1 102,357

Class B (9,026) 237,562 - - - - Class C 3,564 37,651 - - - - SW Dallas Class A - 2,903 - - - - Class B 17,421 (9,892) - - - - Class C 10,548 10,548 - - - - Stemmons Freeway Class A 7,945 8,733 - - - -

Class B 95,023 111,323 - - - - Class C 1 (3,680) - - - - Uptown/Turtle Creek Class A 40,386 70,540 5 1,736,383 - - Class B (11,720) 50,835 - - - - Class C - - - - - - - Fort Worth CBD Class A (37,914) (83,647) 1 280,489 - -

Class B (2,644) (30,796) - - - - Class C - - - - - - Mid Cities Class A 23,546 10,312 1 158,000 - - Class B 33,269 22,304 1 150,000 - - Class C 1,212 7,011 - - - - North Fort Worth Class A 14,282 14,282 - - - -

Class B 46,849 122,506 - - - Class C (2,685) (2,685) - - - - NE Fort Worth Class A (8,631) (8,631) - - - - Class B 17,505 13,809 - - - - Class C - - - - - - South Fort Worth Class A 73,615 49,174 3 317,584 2 91,648

Class B (8,207) (40,486) - - - - Class C 16,760 (15,050) - - - - Dallas Total Class A 212,105 1,575,376 22 6,409,769 3 602,734 Class B 854,027 1,174,772 3 180,000 - - Class C 52,398 62,056 - - - - Fort Worth Total Class A 64,898 (18,510) 5 756,073 2 91,648 Class B 86,772 87,337 1 150,000 - - Class C 15,287 (10,724) - - - - DFW Total Class A 277,003 1,556,866 27 7,165,842 5 694,382 Class B 940,799 1,262,109 4 330,000 - - Class C 67,685 51,332 - - - -

MARKETVIEW INSERT

$29.33

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$13.93

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Figure 3: Average Asking Rates

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Vacancy (%) Sq. Ft. (000’s) Net Absorption Vacancy


Tenant Property Name/Address Total SF Class Lease Type Submarket

Zale Corp. Cypress Waters 256,000 A New Lease Las Colinas

Flagship Mortgage 4600 Regent Blvd 100,000 B Renewal Las Colinas

Atos SE Connection Park I 100,000 A New Lease Las Colinas

CompuCom Dominion Legacy Office Center 92,250 A New Lease Far North Dallas

Undisclosed Bryan Tower 80,832 A Renewal Dallas CBD

Figure 5: Significant Lease Transactions of the Quarter

Buyer Property Name/Address Total SF $/PSF Class Submarket

Hanwha Life KPMG Plaza 474,000 - A Dallas CBD

Fine Line Diversified Development Overton Centre 447,917 - A Southwest Fort Worth

DISD 9400 NCX 387,617 - A Central Expressway

Ascent RE Advisors / EY Ventures Rambler Park 310,771 - A Central Expressway

Figure 6: Significant Sale Transactions of the Quarter

Source: Real Capital Analytics, CBRE Research, Q2 2016.


Source: CBRE Research, Q2 2016. Source: CBRE Research, Q2 2016.




MARKETVIEW INSERT

CONTACTS

Robert C. Kramp Director, Research & Analysis [email protected] Michelle Miller Research Operations Manager [email protected]


CBRE OFFICES

CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201 CBRE Houston 2800 Post Oak, Suite 2300 Houston, TX 77056




SURVEY CRITERIA

DEFINITIONS






SURVEY CRITERIA

DEFINITIONS


CBRE OFFICES



CONTACTS



MARKETVIEW

Rent growth accelerates as construction pipeline widens


Average asking rents in the Dallas/Fort Worth Office market are setting all-time highs, as the market averages surged by 4.5% year-over-year to $22.89 per sq. ft. Rental rate improvement for prime office space is best exemplified in the submarkets where walkability and amenities have created an 18-hour live-work-play market. The benefits of a bustling urban core is best seen in Uptown/Turtle Creek, where average Class A gross asking rents are a commanding $41.43 per sq. ft., an astounding 16.1% escalation from Q1 2015. Similarly, the Preston Center Class A asking rates have climbed 7.3% to $36.58 per sq. ft. over the same time frame.

The construction pipeline is also amplifying demand as six new projects broke ground this quarter, bringing 1.5 million sq. ft. of new construction to the DFW Metroplex. This influx brings the current count of projects under construction to 30, totaling 7.2 million sq. ft. with approximately 46.2% already preleased. The bulk of this activity is located in the Far North Dallas and Uptown/Turtle Creek submarkets, with 2.9 million and 1.7 million sq. ft. under construction, respectively. The development in Far North Dallas is centralized along the Platinum Corridor, with

Liberty Mutual’s one-million-sq.-ft. build-to-suit campus in Legacy West along with six other speculative construction projects including The Star, a 400,000 sq. ft. development along Frisco’s “$5 Billion Mile.” Financial activities and professional & business services dominate the activity in the Uptown/Turtle Creek office market, as a 200,000 sq. ft. lease by PricewaterhouseCoopers jumpstarted the high-profile 517,000 sq. ft. mixed-use Park District development adjacent to Klyde Warren Park. In total, the Uptown/Turtle Creek submarket added an unprecedented 930,000 sq. ft. of new construction in Q1 2016. A multinational financial institution purchased 7-acres of land in the Legacy West development this quarter, where it plans to break ground on a 1.4 million sq. ft. regional campus next quarter that will serve more than 6,000 employees. Although owner-occupied projects are uncounted within the CBRE Research tracked set, it is important to note that there are currently six such projects comprised of 2.8 million sq. ft. under construction throughout the Metroplex. The bulk of this construction can be attributed to Toyota’s 2.1 million sq. ft. North American Headquarter in Far North Dallas.


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Vacancy Rate 18.1%



Completions 1.3 MSF



MARKETVIEW





Submarket Net Total Total Average Q1 YTD 2016 Total

Rentable Vacancy Availability Asking Net Net

Area (%) (%) Rate ($) Absorption Absorption


Class A 7,523,988 15.5 18.1 28.15 167,128 167,128

Class B 4,041,680 13.7 20.1 20.93 5,373 5,373

Dallas CBD 25,522,188 25.1 35.1 23.80 (114,274) (114,274)

Class A 20,213,338 26.0 37.7 25.28 (140,512) (140,512)

Class B 4,615,155 23.4 26.4 18.69 35,929 35,929

East Dallas 3,719,522 13.2 16.3 16.12 (5,763) (5,763)

Class A 583,651 9.8 15.6 N/A 3,419 3,419

Class B 2,590,305 13.6 15.4 16.62 (11,596) (11,596)

Far North Dallas 39,880,750 14.9 19.6 23.68 68,921 68,921

Class A 24,241,907 13.1 17.7 29.52 133,801 133,801

Class B 15,388,843 18.0 22.9 19.84 (64,880) (64,880)

Las Colinas 30,574,928 16.5 21.4 23.49 423,889 423,889

Class A 16,829,019 17.1 23.9 26.95 386,910 386,910

Class B 12,994,047 16.2 18.9 20.11 37,084 37,084

LBJ Freeway 19,580,094 25.9 30.3 18.24 86,027 86,027

Class A 10,395,731 25.1 30.1 20.70 80,787 80,787

Class B 8,997,994 27.0 30.9 16.86 6,518 6,518


Class A 324,964 24.9 - 26.00 - -

Class B 4,159,600 13.3 13.4 18.25 16,203 16,203

Preston Center 4,008,614 10.7 17.2 33.07 (6,186) (6,186)

Class A 3,260,842 9.9 18.2 36.58 7,218 7,218

Class B 649,374 12.8 11.2 26.84 (2,016) (2,016)

Richardson / Plano 23,662,789 16.4 22.1 19.64 971,350 971,350

Class A 11,231,238 12.4 19.3 23.61 690,675 690,675

Class B 12,131,753 20.4 24.6 18.12 246,588 246,588

Southwest Dallas 1,647,842 9.2 16.0 15.68 (24,410) (24,410)

Class A 280,729 5.8 7.3 21.50 2,903 2,903

Class B 1,185,599 9.6 17.4 15.42 (27,313) (27,313)


Class A 3,458,586 18.5 20.3 15.38 788 788

Class B 5,660,341 33.1 38.2 14.83 16,300 16,300


Class A 8,340,657 10.2 16.3 41.43 30,154 30,154

Class B 2,210,201 12.3 23.7 34.77 62,555 62,555

*Class C Statistics are included in the submarket totals, even though they are not broken out in table

MARKETVIEW





Maxim Integrated, Inc. Tollway Center 193,725

Mortgage Contracting Services LLC The Ridge at 121 120,000

MultiView One Panorama Center 110,000


Quadrant Investment Properties Saint Paul Place 273,080

Individual Meadow Park Tower 251,755

West Walnut Hill, LLC Las Colinas Commons 239,000






20%

20%

16% 13%

7%

24%

Manufacturing Professional & Business Services

Trade/Transportation/Utilities Financial Activities

Education & Health Services Other

Submarket Net Total Total Average Q1 YTD 2016 Total



Fort Worth CBD 9,365,503 11.4 14.6 24.26 (73,885) (73,885)

Class A 5,914,246 13.9 17.0 29.31 (45,733) (45,733)

Class B 3,184,582 6.6 10.0 19.21 (28,152) (28,152)

Mid Cities 15,804,104 21.3 27.1 16.82 (18,400) (18,400)

Class A 4,590,028 23.8 36.9 19.78 (13,234) (13,234)

Class B 9,783,509 21.4 24.4 17.27 (10,965) (10,965)

North Fort Worth 1,644,044 12.5 18.5 18.90 75,657 75,657

Class A 511,277 26.2 23.4 N/A - -

Class B 1,097,767 6.6 16.9 18.90 75,657 75,657

Northeast Fort Worth 2,511,010 47.1 52.8 16.79 (3,696) (3,696)

Class A 395,307 83.6 84.9 19.88 - -

Class B 1,980,715 41.9 48.6 15.79 (3,696) (3,696)

South Fort Worth 6,885,760 9.2 17.2 21.74 (88,530) (88,530)

Class A 1,740,623 5.8 18.2 27.8 (24,441) (24,441)

Class B 4,487,437 9.6 11.2 21.94 (32,279) (32,279)

Dallas Total 183,505,932 17.70 23.8 22.90 1,693,674 1,693,674

Class A 105,254,063 16.3 24.0 28.39 1,363,271 1,363,271

Class B 74,016,717 19.0 23.7 20.81 320,745 320,745

Fort Worth Total 36,210,457 17.9 23.0 19.56 (108,854) (108,854)

Class A 13,151,481 18.8 25.3 20.89 (83,408) (83,408)

Class B 20,534,010 17.7 22.4 18.50 565 565

Dallas / Fort Worth Total 221,646,945 18.1 23.7 22.89 1,584,820 1,584,820

Class A 119,836,128 17.5 24.2 28.18 1,279,863 1,279,863

Class B 95,158,902 19.3 23.4 19.44 321,310 321,310

MARKETVIEW



$28.18

$19.44

15

20

25

30

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

Asking Rate ($/SF)

0200400600800

1,0001,2001,4001,6001,800

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

Sq. Ft. (000’s)

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,500

2009 2010 2011 2012 2013 2014 2015 YTD 2016

Sq. Ft. (000’s)

Market-wide availability decreased by 10 basis points (bps) to 23.7% year-over-year in Q1 2016, which indicates the ample amount of leasing activity expected to commence in the coming quarters. The total vacancy rate decreased year-over-year by 10 bps to 18.1%; however, this represents a 40 bps increase in vacancy from Q4 2015. that can be primarily contributed to the vacant 3-building Galatyn Commons Business Park that came back online after a completion in its renovations. Of the total amount of vacant space in the market, only 4.7% is attributed to sublease space, a noteworthy decrease of 50 bps quarter-over-quarter.

Class A gross asking rents continued to experience growth, increasing by approximately 4.4% year-over-year to $28.18 per sq. ft. in Q1 2016. Class B average asking rents experienced a marginally higher rate of growth, raising by 4.9% over the same timeframe to $19.44 per sq. ft.

DFW experienced its 23rd consecutive quarter of positive net absorption, totaling 1,584,820 sq. ft. for Q1 2016. This amount of total net absorption represents a year-over-year increase of a striking 30.4%. This quarter experienced an influx of large tenant move-ins as State Farm moved into the fourth and final building in their 2.1 million sq. ft. Cityline campus in Richardson, and 7-Eleven moved into their 325,000 sq. ft. build-to-suit corporate headquarters in Las Colinas. Geico also moved into the entire 232,710 sq. ft. Campbell Creek Business Park in Richardson, formerly occupied by Fossil.

There were five office projects that delivered in Q1 2016, all of which were Class A, totaling 1.3 million sq. ft. with approximately 67.0% preleased. These deliveries include the new 325,000 sq. ft. 7-Eleven headquarters in Cypress Waters, as well as the 500,000 sq. ft. State Farm Campus Building D in Cityline. Three speculative developments delivered this quarter: the 170,000 sq. ft. Frisco Bridges Place and 166,000 sq. ft. Platinum Park I in Far North Dallas, as well as the 141,000 sq. ft. Connection Park I in Las Colinas.


LEASE RATES

NET ABSORPTION






© 2016 CBRE, Inc. |





Class A Class B

Total Availability Rate Total Vacancy Rate

18.1%

23.7%

17

19

21

23

25

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

%





SURVEY CRITERIA

DEFINITIONS


CBRE OFFICES



CONTACTS


Lauren Paris Senior Research Analyst +1 214 979 6587 [email protected] Julia Burman Research Coordinator +1 214 979 6530 [email protected]

MARKETVIEW

Record-Setting 2015 Previews Robust 2016


The Dallas/Fort Worth office market experienced its 22nd consecutive quarter of favorable leasing fundamentals in Q4 2015 and is poised for a strong 2016. Q4 2015 amassed 605,714 sq. ft. of positive net absorption, bringing year-end 2015 to a record breaking 5.2 million sq. ft., a remarkable 59.2% increase over the 3.3 million sq. ft. of net absorption amassed in 2014. Average asking rents for all classes experienced an accelerated rate of growth, increasing by 5.9% year-over-year to $21.90 per sq. ft.

Vigorous office demand kept vacancy down at 17.7%, a 70 basis point decrease from year-end 2014, and the first year vacancy has closed below 18% since 2008. Not only does this vacancy level signify a return to pre-recessionary ones, it is among the lowest Dallas/Fort Worth has experienced since the late-1980’s. Market wide availability decreased by 20 basis points to 23.5% to close out 2015, which signifies the abundance of new tenant move-ins and expansions already slated for 2016. DFW’s highly educated workforce and central location continues to attract corporations in finance and tech as San Francisco-based Charles Schwab and Omaha-based TD Ameritrade announced plans to build new campuses in the Metroplex this quarter.

The North Texas economy continues to expand as annual non-farm employment growth remained strong through November 2015. The Bureau of Labor Statistics reports 3.0% new jobs growth year-over-year with 101,000 payroll gains in the DFW Metroplex, pushing unemployment down by 40 basis points to 4.0% year-over-year, far below the U.S. average of 4.8% and the state at 4.5%. With corporate consolidation and relocation projects by Liberty Mutual, Toyota Motors, State Farm, and Alcatel-Lucent currently under construction, buoyant projected North Texas employment growth will keep the state in the black in 2016 and out of recession amidst the downturn in the oil sector. Moody’s Analytics predicts annualized employment growth of no less than 2.58% for each quarter of 2016, which is well within the healthy range of job expansion for DFW. The key office-using sectors are expected to outpace the overall metro once again, with forecasted annualized growth of at least 3.45% for the next four quarters, lifted predominantly by the professional and business services sector.


16

18

20

22

0

500

1,000

1,500

2,000

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Vacancy Rate (%)

Sq. Ft. (000’s) Net Absorption Vacancy Rate

Vacancy Rate 17.7%


Net Absorption 605,714 SF

Completions 1.3 MSF

Figure 1: Total Vacancy vs. Net Absorption *Arrows indicate change from previous quarter.


MARKETVIEW





Submarket Net Total Total Average Q4 2015 Total




Class A 7,524,169 17.7 18.5 27.22 95,588 389,184

Class B 4,104,914 14.3 18.8 20.00 (2,869) 110,950

Dallas CBD 25,560,149 23.7 33.4 21.89 29,956 454,132

Class A 20,827,997 25.5 36.7 22.50 37,843 333,066

Class B 4,038,457 16.9 18.8 18.69 (20,833) 158,523

East Dallas 3,773,643 12.9 15.9 17.05 10,888 51,178

Class A 583,651 10.4 13.1 N/A - 7,145

Class B 2,587,885 13.1 15.6 13.29 10,022 8,158

Far North Dallas 39,550,472 12.9 19.9 22.89 719,289 1,604,239

Class A 23,897,173 12.5 13.1 27.98 511,811 1,118,854

Class B 15,393,299 17.2 23.1 19.84 207,478 485,385

Las Colinas 30,097,259 16.8 21.9 23.56 (302,541) (23,387)

Class A 16,448,779 17.3 25.0 26.72 (271,433) (49,819)

Class B 12,896,615 16.6 18.6 20.11 (28,604) (33,423)

LBJ Freeway 19,583,129 26.5 32.0 18.82 (172,422) (30,204)

Class A 10,041,691 25.8 31.7 21.82 (158,247) (180,115)

Class B 9,355,069 27.5 32.5 16.84 755 164,060


Class A 324,964 24.9 - 26.00 - -

Class B 4,160,257 13.6 16.7 17.71 9,145 122,016

Preston Center 4,080,337 10.3 15.9 35.28 (53,180) 124,521

Class A 3,260,842 10.1 17.0 36.86 (33,343) 156,719

Class B 679,435 12.0 12.2 27.79 (18,370) (32,273)


Class A 10,294,111 7.5 17.0 23.01 371,245 1,385,607

Class B 11,769,940 19.6 12.2 18.12 26,045 (46,861)

SW Dallas 1,647,551 12.4 14.3 15.89 (13,563) (38,535)

Class A 280,729 6.6 8.3 21.50 - -

Class B 1,185,308 13.0 14.8 15.11 (13,563) (38,762)


Class A 3,458,481 18.5 20.7 15.83 30,771 222,758

Class B 5,680,342 28.9 34.1 14.76 40,265 42,835


Class A 8,311,476 10.6 14.9 38.80 19,828 304,654

Class B 2,165,196 15.1 28.4 33.94 (4,766) 5,458

MARKETVIEW





One Source Virtual 9001 Cypress Waters Blvd 217,170

Securus Technologies 4000 International 150,000

Charles Schwab 2050 Roanoke Rd 130,000


TriGate Capital Comerica Bank Tower 1,530,957

Apollo Global Real Estate/Vanderbilt Partners

Towers at Williams Square 1,395,980

Greenfield Partners TriWest Pllaza 369,052






31%

15% 12%

13%

10%

19%

Financial Activities Information

Education & Health Services Professional & Business Services

Trade/Transportation/Utilities Other

Submarket Net Total Total Average Q4 2015 Total



Fort Worth CBD 9,365,503 10.6 14.6 25.45 59,979 394,535

Class A 5,914,246 13.1 17.4 28.96 84,531 248,698

Class B 3,184,582 5.7 9.5 18.28 (24,552) 26,599

Mid Cities 15,861,475 21.4 28.3 16.76 (210,814) (68,691)

Class A 4,535,739 24.6 41.4 19.43 (17,637) 102,085

Class B 9,895,133 21.1 24.5 16.88 (183,074) (184,090)

North Fort Worth 1,644,044 17.1 19.3 18.87 (63,461) 277,723

Class A 511,277 26.2 26.2 N/A 9,596 356,168

Class B 1,097,767 13.5 16.8 18.87 (73,057) (78,445)

Northeast Fort Worth 2,511,418 46.9 51.1 16.66 (23,135) 54,704

Class A 395,307 83.6 84.9 20.48 (19,742) (17,615)

Class B 1,981,123 41.7 46.5 15.03 (3,393) 72,369

South Fort Worth 6,934,244 7.9 13.9 21.49 50,149 58,786

Class A 1,727,623 4.4 7.6 27.07 7,539 (6,922)

Class B 4,548,921 8.7 16.6 21.56 40,175 47,620

Dallas Total 183,505,932 17.7 23.5 22.43 792,996 4,503,752

Class A 105,254,063 16.3 23.9 30.72 604,063 1,558,013

Class B 74,016,717 19.0 23.2 20.57 204,705 493,203

Fort Worth Total 36,316,684 17.6 23.3 19.62 (187,282) 717,107

Class A 13,084,192 18.6 26.8 23.91 64,287 2,810,977

Class B 20,707,526 17.6 22.2 18.05 (243,901) 420,166

Dallas / Fort Worth Total 219,822,616 17.7 23.5 21.90 605,714 5,220,859

Class A 118,338,255 17.2 24.2 26.50 668,350 4,368,990

Class B 94,724,243 18.7 23.0 19.17 (23,440) 929,125

MARKETVIEW



$26.50

$19.17

15

20

25

30

Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Asking Rate ($/SF)

0200400600800

1,0001,2001,4001,6001,800

Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Sq. Ft. (000’s)

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,500

2009 2010 2011 2012 2013 2014 2015

Sq. Ft. (000’s)

Market-wide availability decreased by 20 basis points to 23.5% to close out 2015, which signifies the ample amount of tenant move-ins already slated for 2016. The total vacancy rate remained static quarter-over-quarter at 17.7%; however, this represents a 70 basis point decrease in vacancy from year-end 2014. Of the total amount of vacant space in the market, only 5.2% is attributed to sublease space.

Gross asking rents continued to experience growth, as average office rents in the Metroplex increased by approximately 5.9% year-over-year to $21.90 per sq. ft. in Q4 2015. Class A asking rates in Preston Center have climbed to $36.86 per sq. ft., while Class A space in Uptown/Turtle Creek is commanding an average rate of $38.80 per sq. ft.

DFW experienced its 22nd consecutive quarter of positive net absorption, totaling 605,714 sq. ft. for Q4 2015. This brings 2015 year-end net absorption to a record breaking 5.2 million sq. ft., an astounding 59.2% year-over-year increase. This quarter saw a handful of large tenant move-ins as Raytheon moved into their 490,000 sq. ft. build-to-suit in Richardson and Gearbox Software expanded into 97,000 sq. ft. at the recently delivered Tower at Frisco Square. On the contrary, Fed Ex decreased their overall footprint in the Metroplex by 12% as they consolidated into their new 265,000 sq. ft. build-to-suit in Plano.

There were five office projects that delivered in Q4 2015, totaling 1.3 million sq. ft. with approximately 73.5% preleased. These deliveries include the new 490,000 sq. ft. Raytheon headquarters in Richardson as well as the new 265,000 sq. ft. Fed Ex headquarters in Plano. The under construction pipeline continues to amplify as seven new projects broke ground this quarter, bringing 1.3 million sq. ft. of new construction to the DFW Metroplex. This brings the current count of projects under construction to 29, totaling 6.8 million sq. ft. with approximately 46.5% already preleased. The bulk of this under construction activity is located in Far North Dallas, with 3 million sq. ft. under construction, including Liberty Mutual’s one-million sq. ft. build-to-suit campus in West Plano.


LEASE RATES

NET ABSORPTION

UNDER CONSTRUCTION & COMPLETIONS





© 2015 CBRE, Inc. |





Class A Class B


17.7%

23.5%

17

19

21

23

25

Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

%





SURVEY CRITERIA

DEFINITIONS


CBRE OFFICES



CONTACTS



MARKETVIEW

Office absorption outpaces prior year’s entire record; 4.6 million sq. ft. year-to-date


The Dallas/Fort Worth office market experienced its 21st consecutive quarter of favorable leasing fundamentals in Q3 2015 and appears poised for a strong second half of 2015. Q3 2015 yielded the most net absorption in a single quarter so far in 2015, increasing to approximately 1.7 million sq. ft. Year-to-date, market net absorption totals a record breaking 4.6 million sq. ft., surpassing the entire year-end 2014 total absorption of 3.3 million sq. ft. by 41.0%. Average asking rental rates for all class types have experienced an accelerated rate of growth, increasing by 4.0% year-over-year to $21.22 per sq. ft.

Resilient office demand drove average vacancy down from Q2 2015 by 20 points to 17.7%—the third time vacancy has dipped below 18% since 2008. Not only does this vacancy rate signify a return to pre-recessionary levels, it is one of the lowest Dallas/Fort Worth has experienced since the late 1980’s. Pre-leasing among delivered construction is currently 66.5%, a contributing factor behind this decrease in market vacancy.

The North Texas economy continues to grow despite low crude oil prices, as annual non-farm employment growth remained strong through August 2015. The Bureau of Labor Statistics reports a 3.2% job growth year-over-year with 104,100 new jobs in the DFW Metroplex, which brought the unemployment rate down by 120 basis points to 3.9% year-over-year, far below the U.S. average unemployment rate of 5.2% and the Texas unemployment rate of 4.4%. With corporate consolidation and relocation projects by Liberty Mutual, Toyota Motors, State Farm, Alcatel-Lucent, and Raytheon currently under construction, employment growth is projected to remain positive in the coming months. The DFW population of 6.9 million residents is expected to increase by 7.1% over the next five years to 7.4 million, according to Nielson. This strong growth equates to an average of 360 people arriving to North Texas per day, equivalent to a full passenger load of a Boeing 747 jumbo jet. DFW’s population has an average age of 35 years old, with half of its residents in the 20-54 demographic.


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Q22011

Q32011

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Q32013

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Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Vacancy Rate (%)

Sq. Ft. (000’s) Net Absorption Vacancy Rate

Vacancy Rate 17.7%



Completions 2.0 MSF

Figure 1: Total Vacancy vs. Net Absorption *Arrows indicate change from previous quarter.


MARKETVIEW




Submarket Net Rentable

Area

Total Vacancy

(%)

Total Availability

(%)

Average Asking

Rate ($)

Q3 Net

Absorption

YTD Net

Absorption


Class A 7,524,169 19.0 21.4 26.25 70,861 293,596

Class B 4,104,914 14.3 18.4 18.93 76,945 113,819

Dallas CBD 25,363,638 24.1 32.6 21.88 141,447 424,176

Class A 20,106,486 24.6 34.4 22.87 83,225 295,223

Class B 4,563,457 24.4 27.1 18.30 50,901 179,356

East Dallas 3,846,984 12.9 16.3 16.53 -7,689 40,290

Class A 583,651 10.4 14.0 N/A 1,699 7,145

Class B 2,661,226 13.1 16.9 16.41 -9,388 -1,864

Far North Dallas 38,897,655 14.5 20.2 22.44 310,750 884,950

Class A 23,180,948 12.0 17.2 27.53 194,311 607,043

Class B 15,456,707 18.6 25.1 19.24 116,439 277,907

Las Colinas 30,073,922 15.9 22.9 23.27 225,624 279,154

Class A 16,429,572 15.7 25.4 26.40 230,296 221,614

Class B 12,892,485 16.7 20.4 19.79 -4,672 -4,819

LBJ Freeway 19,602,428 25.3 30.9 18.46 157,515 142,218

Class A 10,061,278 23.6 29.9 21.31 41,139 -21,868

Class B 9,354,781 27.5 32.2 16.33 115,372 163,305


Class A 324,964 24.9 - 26.00 -

Class B 4,087,637 14.1 16.7 18.33 27,699 112,871

Preston Center 4,080,337 9.0 14.5 35.19 178,765 177,701

Class A 3,260,842 9.1 15.4 33.82 201,134 190,062

Class B 679,435 9.3 11.8 28.85 -23,516 -13,903

Richardson / Plano 22,504,242 16.3 22.6 19.22 -181,335 781,639

Class A 10,261,081 10.8 21.1 22.87 -66,038 1,014,362

Class B 11,943,363 20.9 23.5 18.06 -114,447 -72,906

SW Dallas 1,647,551 11.6 13.8 15.71 2,372 -24,972

Class A 280,729 6.6 8.3 21.50 -

Class B 1,185,308 11.8 14.0 14.80 2,372 -25,199


Class A 3,458,481 19.4 20.4 15.68 31,377 191,987

Class B 5,825,122 31.5 36.7 13.13 -22,556 2,570


Class A 8,309,047 10.6 16.9 38.07 103,187 284,826

Class B 2,165,196 14.9 28.3 32.42 -7,339 10,224


MARKETVIEW





Geico Insurance 2280 N Greenville Ave 232,000

Ryan* 13155 Noel Rd 176,130

D. R. Horton 1361 Wet N Wild Way 150,000


CBRE Global Investors Galleria Towers 1,431,770

GlenStar/USAA Energy Square 958,445

Woods Capital Enterprises 2100 Ross Ave 843,728




Figure 4: 2015 YTD Signed Office Leases by Industry Type


Submarket Net Rentable

Area

Total Vacancy

(%)

Total Availability

(%)

Average Asking

Rate ($)

Q3 Net

Absorption

YTD Net

Absorption

Fort Worth CBD 9,365,503 11.3 13.2 26.01 125,540 334,556

Class A 5,914,246 14.5 16.4 28.87 109,980 164,167

Class B 3,184,582 5.0 7.4 18.23 15,560 51,151

Mid Cities 15,889,539 20.0 25.3 17.46 74,857 142,123

Class A 4,563,803 24.0 28.9 21.62 109,100 119,722

Class B 9,895,133 19.2 25.0 16.94 -39,369 -1,016

North Fort Worth 1,644,044 13.3 19.9 18.94 345,672 341,184

Class A 511,277 28.1 26.2 N/A 346,572 346,572

Class B 1,097,767 6.8 17.6 18.94 -900 -5,388

Northeast Fort Worth 2,586,456 36.0 51.7 15.90 56,117 77,839

Class A 395,307 3.1 78.1 21.54 4,923 2,127

Class B 2,056,161 43.7 48.7 15.00 51,194 75,762

South Fort Worth 6,886,709 8.5 14.2 21.15 12,898 8,637

Class A 1,687,357 2.6 5.8 26.63 -16,906 -14,461

Class B 4,541,652 9.6 17.2 21.17 31,868 7,445

Dallas Total 182,975,039 18.0 24.1 21.79 1,097,208 3,710,756

Class A 103,781,248 16.6 24.0 30.53 889,492 953,950

Class B 74,919,631 20.1 24.6 19.78 218,897 288,498

Fort Worth Total 36,372,251 16.4 21.7 19.58 615,084 904,389

Class A 13,071,990 16.5 21.6 24.61 553,669 2,746,690

Class B 20,775,295 16.7 22.5 18.01 58,353 664,067

Dallas / Fort Worth Total 219,347,290 17.7 23.7 21.22 1,712,292 4,615,145

Class A 116,853,238 16.6 23.7 26.44 1,443,161 3,700,640

Class B 95,694,926 19.4 24.2 18.65 277,250 952,565

30%

21% 11%

9%

9%

20%

Financial Activities Information

Education & Health Services Professional & Business Services

Trade/Transportation/Utilities Other*Renewal/Expansion

MARKETVIEW



17.7%

23.7%

17

19

21

23

25

Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

%

$26.44

$18.65

15

20

25

30

Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Asking Rate ($/SF)

0200400600800

1,0001,2001,4001,6001,800

Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Sq. Ft. (000’s)

0

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2009 2010 2011 2012 2013 2014 2015 YTD

Sq. Ft. (000’s)

The total avability rate remained static at 23.7%, while market wide vacancy decreased by 20 basis points in Q3 2015, closing with a 17.7% vacancy rate as a number of large tenants took occupancy throughout the DFW market. Of the total amount of vacant space in the market, only 6.3% is attributed to sublease space.

Gross asking rents continued to experience growth, as average office rents in the Metroplex increased by approximately 4.0% year-over-year to $21.22 per sq. ft. in Q3 2015. Class A asking rates in Preston Center have surpassed $33 per sq. ft., while Class A space in Uptown/Turtle Creek is commanding an average rate of $38 per sq. ft.

DFW experienced its 21st consecutive quarter of positive net absorption, totaling 1.7 million sq. ft. While the majority of this absorption is attributed to tenants in the mid-size range of 10,000-20,000 sq. ft., this quarter also saw a handful of large tenant move-ins such as FAA into 357,000 sq. ft. at their recently completed build-to-suit project in North Fort Worth, Frontier Communications into 192,000 sq. ft. at Lakeside Campus, AMN Healthcare into 108,000 sq. ft. at Cypress Waters, and Energy Transfer Partners moving into 134,000 sq. ft. at the newly delivered 8111 Westchester in Preston Center.

There were 13 office projects that delivered in Q3 2015, totaling two million sq. ft. with approximately 66.5% preleased. KPMG Plaza at Hall Arts, the second multitenant office building built in the Dallas CBD since 1987, delivered with a preleased rate of 65%. An increase in construction completions did not slow the pace of construction starts, as eleven new projects broke ground, bringing 2.4 million sq. ft. of new construction to the suburban markets. There are currently 29 projects under construction in the DFW Metroplex, totaling 6.8 million sq. ft., with approximately 54.3% already preleased. The bulk of this under construction activity is located in Far North Dallas, with 3.7 million sq. ft. under construction, including Liberty Mutual’s one-million sq. ft. build-to-suit campus in West Plano.


LEASE RATES

NET ABSORPTION

UNDER CONSTRUCTION & COMPLETIONS





© 2015 CBRE, Inc. |





Class A Class B






SURVEY CRITERIA

DEFINITIONS


CBRE OFFICES



CONTACTS

Robert C. Kramp Director, Research & Analysis [email protected] Michelle Miller Research Operations Manager [email protected]


MARKETVIEW

Voracious Tenant Demand by Mid-Year; 2.9 Million Sq. Ft.



Vacancy Rate17.9%

*Arrows indicate change from previous quarter.

Avg. Asking Rate20.75 $/SF

Net Absorption1,686,455 SF

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21

22

(1.2)(0.8)(0.4)0.00.40.81.21.62.02.42.83.23.6

2008 2009 2010 2011 2012 2013 2014 2015




Completions392,995 SF


RELENTLESS NET ABSORPTION REACHES YET

ANOTHER HISTORIC HIGH

Net absorption throughout the DFW office market

continued to trend positively for the 20th consecutive

quarter dating back to Q3 2010. The Q2 2015 total net

absorption of 1,686,455 sq. ft. is the largest quarter of

positive net absorption since Q1 2009.

All together, the first half of 2015 recorded 2,902,853 sq.

ft. of positive net absorption, the highest accumulation of

net absorption for two back-to-back quarters on record.

DFW VACANCY MARCHES TOWARDS PRE-

RECESSIONARY LEVELS

Market wide vacancy decreased by 40 basis points in

Q2 2015, closing with a 17.9% vacancy rate—only the

second time the vacancy rate has dipped below 18%

since 2008.

THE DFW METROPLEX RANKS THIRD IN U.S.

FOR JOB GAINS SO FAR THIS YEAR

According to the U.S. Bureau of Labor Statistics, annual

year-over-year non-farm employment growth throughout

Dallas/Fort Worth remained strong through May 2015

with a recorded 3.7 % growth, representing 112,200

new payrolls.

MARKETVIEW



MARKET ACTIVITY

Dallas/ Fort Worth experienced twice the amount of net leasing activity in the first half of 2015 than it did in 2014, as expanding and relocating businesses continue to commit to the Metroplex.

Richardson’s Telecom Corridor saw a surge of activity as State Farm completed their headquarter relocation and conslidation into their 1,092,084 sq. ft. CityLine campus this quarter. State Farm’s former Richardson 812,503 sq. ft. Lakeside Campus saw plenty of activity as Carrolton-based software provider RealPage, and New-England based Frontier Communications, both signed leases to occupy the majority of the two building campus in late-2016.

Another large office lease that was signed this quarter was by Boston-based Liberty Mutual, which confirmed its plans to relocate 5,000 of its employees into a two-tower, 900,000+ sq. ft. campus that is to be built in Plano’s Legacy West by the end of 2017. Similarly, California-based housing research firm CoreLogic confirmed its plans to relocate 500 of its North Texas workers into an approximately 330,000 sq. ft. that will be built in Las Colinas’ Cypress Waters.


ECONOMIC CONDITIONS / DEMOGRAPHICS

In May 2015, year-over-year seasonally adjusted unemployment dropped once again across the board for DFW, Texas, and the U.S. The unemployment rate in DFW fell 120 basis points (bps) from the May 2014 level and now stands at 4.0%. Texas as a whole ended the second quarter with a 4.3% unemployment rate. Additionally, both are well below the U.S. 5.5% unemployment rate.

Seasonally adjusted, annual employment growth in the DFW metro area was 3.7% for the 12 months ending May 2015, equating to a total of 112,200 jobs. The industries that had the strongest job growth rates during this 12-month time period were Financial Activities (+4.6%), with12,200 new jobs added, and Professional & Business Services (+4.5%), with 23,900 new jobs added.

DFW is currently the fourth largest MSA in the country and is well-known for being one of the fastest growing metro areas. DFW currently has an estimated population of 6.9 million, which is 33.6% higher than in 2000. Furthermore, Claritas projects a population of 7.4 million in DFW by 2020, which equates to a growth rate of 7.1% over the next five years. DFW’s population currently averages an age of 35 with half of the population in their prime earning years of 20-54.

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Job Count (M)UnemploymentRate (%)

Source: Bureau of Labor Statistics, May 2015.Seasonally Adjusted Non-Farm Employment.

USA Texas DFW DFW Jobs

Figure 2: Unemployment Rate and Non-Agricultural Jobs

MARKETVIEW



Figure 3: Market Overview by Submarket


Market

Net RentableArea(SF)

DirectVacancy

(SF)

DirectVacancyRate (%)

TotalVacancyRate (%)

AnnualAverage Asking

Lease Rate ($/SF)

Qtr.Direct Net Absorption

(SF)

Qtr.Total Net

Absorption(SF)

2015Total Net

Absorption(SF)

Central Expressway 11,786,506 2,165,637 18.4 18.3 22.45 153,868 180,971 254,648

Dallas CBD 25,082,000 5,985,100 23.9 23.7 22.14 186,846 210,319 282,729

East Dallas 3,846,984 485,141 12.6 12.7 16.07 59,715 59,715 47,979

Far North Dallas 38,247,208 4,984,340 13.0 14.2 22.46 72,725 82,309 574,200

Las Colinas 30,180,713 4,692,981 15.5 16.8 22.97 266,509 213,998 53,530

LBJ Freeway 19,647,681 5,070,358 25.8 26.0 18.72 (6,877) (20,204) (15,297)

Lewisville / Denton 4,641,364 646,354 13.9 14.2 19.29 137,864 125,352 88,656

Preston Center 3,890,337 342,750 8.8 9.3 32.23 10,841 6,504 (1,064)

Richardson / Plano 22,729,897 3,256,034 14.3 15.5 19.26 423,570 493,187 962,974

SW Dallas 1,647,551 193,855 11.8 11.8 15.31 (14,299) (14,299) (-27,344)

Stemmons Freeway 10,007,835 2,634,854 26.3 27.3 13.51 57,850 44,305 193,340

Uptown / Turtle Creek 10,389,265 1,051,386 10.1 10.9 35.76 122,837 151,581 199,202

Fort Worth CBD 9,365,503 1,167,972 12.0 12.5 26.27 190,662 166,067 209,016

Mid Cities 15,795,067 2,486,343 15.7 20.5 17.61 48,187 32,794 67,266

North Fort Worth 1,286,830 181,263 14.0 14.9 19.08 0 0 (4,488)

Northeast Fort Worth 2,586,456 973,077 37.6 38.2 17.67 18,166 3,035 21,722

South Fort Worth 6,771,657 528,889 7.8 8.0 20.98 (48,564) (49,179) (4,261)

Dallas Total 182,678,564 31,508,790 16.2 16.7 21.68 1,471,449 1,533,738 2,613,548

Fort Worth Total 35,805,513 5,337,544 17.4 18.8 20.32 208,451 152,717 289,305

Dallas / Fort Worth Total 218,211,396 36,805,050 16.9 17.9 20.75 1,679,900 1,686,455 2,902,853

MARKETVIEW

ABSORPTION AND VACANCY

Market wide vacancy decreased by 40 basis points in Q2 2015, closing with a 17.9% vacancy rate—only the second time the vacancy rate has dipped below 18% since 2008. Not only does this signify a return to pre-recessionary levels, this is one of the lowest vacancy rates that Dallas/Fort worth has experienced since the late 1980’s. DFW experienced its 20th consecutive quarter of positive net absorption, which totaled 1,686,455 sq. ft. for the quarter. All together, the first half of 2015 recorded 2,902,853 sq. ft. of positive net absorption, the highest accumulation of net tenant demand for two back-to-back quarters on record in the Metroplex. The majority of these move-ins are in the mid-size range of 10,000-20,000 sq. ft., providing a real balance to what has been a market dominated by large tenant demand.

LEASE RATES

Gross asking rents continued to experience growth, as average office rents in the metroplex are up approximately 5% year-over-year. The overall market average rose moderately to $20.75 per sq. ft. in Q2 2015 from $20.70 per sq. ft. in Q1 2015; However, Class A rates increased at an especially strong pace, rising to $29.00 per sq. ft. from $27.00 per sq. ft. for the same timeframe.

CONSTRUCTION

In Q2 2015, the total office square footage under construction registered 7.3 million sq. ft., which is a one million sq. ft. increase from Q1 2015. The bulk of under construction activity is concentrated in West Plano, Richardson’s Telecom Corridor, and Far North Dallas, with approximately 49.8% of the total pipeline square footage already pre-leased. This quarter, Toyota Motor Corp. revealed its final building plans for their North American headquarters relocation from California to West Plano. The $300 million 100-acre west Plano Campus is expected to be completed in Q1 2017.



Figure 4: Net Absorption and Vacancy Rate

Figure 5: Asking Rates, Gross Avg. Annual

Figure 6: Construction




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Vacancy Rate (%)

MSF

Direct Absorption Total AbsorptionDirect Vacancy Rate Total Vacancy Rate

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($/SF)

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MSF

Under Construction Delivered Construction

MARKETVIEW

CAPITAL MARKETS OVERVIEW

According to data tracked by Real Capital Analytics, investment sales activity remains strong across the Dallas/Fort Worth office market. Sales volume over the first half of 2015 totaled $1.42 billion, up 7% over sales volume of $1.33 billion during the first six months of 2014.

During the second quarter of 2015 alone, sales volume totaled $488.5 million with pending sales totaling another $368.0 million at the end of June. Investors continue to capitalize on the significant occupancy gains resulting from record setting absorption in 2014 and the continued expansion among office-using employers over the first six months of 2015. Moreover, competition among lenders has resulted in robust liquidity within the debt markets and has contributed to the favorable capital markets environment.

The DFW market continues to see new investors—both domestic and international—who seek to capture yield not otherwise available in coastal markets and to take advantage of the ever-improving fundamentals of our local and state economy. Notably, Dallas/Fort Worth was recently named by a recent CBRE report as the #2 market for investment in 2015, and both investors and lenders remain focused on placing significant amounts of capital in the DFW market.

Dallas-based real estate company, Cawley Partners, teamed up with Chicago-based real estate investment company GEM Realty Capital to purchase the 812,000 sq. ft. Lakeside Campus located in the Richardson submarket. The two-building Class A office park consists of a 16-story, 414,543 sq. ft. building at 2221 Lakeside Blvd, and a four-story, 399,788 sq. ft. building at 2201 Lakeside Blvd. The campus was sold by a joint venture between Pillar Commercial and Eland Resources.

The Las Colinas submarket saw two large buildings change hands this quarter. The first sale was Waterway Tower, a 13-story, 221,941 sq. ft. Class A office tower purchased by Sun Life Assurance Company of Canada. The second sale was of 4000 Horizon Way, a 292,988 sq. ft. office building purchased by Dallas-based Champion Partners. The single-tenant fully leased building was sold by First Horizon National Corp.

Maryland-based Artemis Real Estate Partners, in a joint venture with Dallas-Based Frontier Equity, has acquired The Addison, an 11-story, 260,000 sq. ft. Class A office tower located in the Far North Dallas submarket along the Dallas North Tollway near Belt Line Road.



Figure 7: Top Sales Transactions


Buyer Seller Date Bldg. SF Property Name Class

GEM/Cawley Partners Pillar Commercial/Eland Resources June 2015 812,503 Lakeside Campus A

Undisclosed Metzler June 2015 306,244 Galleria North Tower II A

Westdale Five Mile Capital/Capstar June 2015 296,358 Ten Thousand North Central A

Champion Partners First Horizon National Corp June 2015 292,988 4000 Horizon Way B

Sun Life Assurance Co. Codina Partners May 2015 221,941 Waterway Tower A

Frontier Equity GE Capital June 2015 205,512 The Addison A

MARKETVIEW


CONTACTS

Robert C. KrampDirector, Research & [email protected]

Michelle MillerResearch Operations [email protected]

Lauren Paris Senior Research Analyst+1 214 979 [email protected]

Julia BurmanResearch Coordinator+1 214 979 [email protected]

CBRE OFFICES

CBRE Houston2800 Post Oak, Suite 2300Houston, TX 77056

CBRE Dallas2100 McKinney Ave, Suite 700Dallas, TX 75201

To learn more about CBRE Research,or to access additional research reports,please visit the Global Research Gateway atwww.cbre.com/researchgateway.


MARKETVIEW

Q1 2015 is highest quarter for

DFW office deliveries in a

decade, over 1.5 million sq. ft.



18.3%


20.70 $/SF 1,216,398 SF

• Annual year-over-year employment growth throughout

Dallas/Fort Worth (DFW) remained strong through

October 2014 with 4.4% growth, representing

136,300 new jobs.

• The largest office sale that transacted over the quarter

was the purchase of Canal Centre in Addison, sold by

LaSalle Investment Management.

• Moody's Analytics forecasts gross metro product to

grow 4.5% in 2015 and 5.8% in 2016 for the DFW

metro.

• Q1 2015 saw a rise in new completions and an

increased pace of new construction starts. Despite

this uptick in activity, the total under construction

pipeline registered 6.3 million sq. ft. over the quarter,

due to State Farm’s 1.5 million sq. ft. delivery.

• Market wide vacancy decreased by 10 basis points in

Q1 2015, closing with an18.3% vacancy rate, twelve

months after vacancy dipped below 18% for the first

time since 2008.

• Net absorption throughout the DFW office market


quarter dating to Q3 2010.

17

18

19

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(1.2)

(0.8)

(0.4)

0.0

0.4

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1.2

1.6

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2.4

2.8

3.2

3.6

2008 2009 2010 2011 2012 2013 2014 2015




1,533,210 SF


MARKETVIEW





2,800 2,850 2,900 2,950 3,000 3,050 3,100 3,150 3,200 3,250 3,300

0123456789

10

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Job Count Unemployment Rate (%)

Source: Bureau of Labor Statistics, December 2014. Seasonally Adjusted Non-Farm Employment. USA Texas DFW DFW Jobs


MARKETVIEW





Market

Net Rentable Area (SF)

Direct Vacancy

(SF)

Direct Vacancy Rate (%)

Total Vacancy Rate (%)

Annual Average Asking

Lease Rate ($/SF)

Qtr. Direct Net Absorption

(SF)

Qtr. Total Net Absorption

(SF)

2015 Total Net Absorption

(SF)


Dallas CBD 25,663,223 6,340,844 24.7 25.4 21.57 91,317 72,410 72,410

East Dallas 3,818,057 544,856 14.3 14.4 15.85 (11,736) (11,736) (11,736)

Far North Dallas 38,594,895 5,151,324 13.3 14.4 22.13 378,438 491,891 491,891

Las Colinas 30,043,676 4,808,615 17.1 17.1 22.96 (167,222) (160,468) (160,468)

LBJ Freeway 19,744,870 5,065,435 25.7 25.8 18.69 (9,168) 4,907 4,907

Lewisville / Denton 4,696,447 799,854 17.0 17.1 18.77 (41,420) (36,696) (36,696)

Preston Center 3,890,337 353,591 9.1 9.5 32.53 1,897 (7,568) (7,568)

Richardson / Plano 22,630,154 3,727,109 16.5 17.7 18.95 746,047 469,787 469,787

SW Dallas 1,665,033 179,556 10.8 10.8 15.22 (13,050) (13,050) (13,050)

Stemmons Freeway 10,007,722 2,692,704 26.9 27.7 13.49 149,035 149,035 149,035

Uptown / Turtle Creek 10,394,060 1,174,223 11.3 11.9 34.81 22,193 47,621 47,621

Fort Worth CBD 9,438,193 1,345,685 14.3 14.6 26.25 51,433 42,949 42,949

Mid Cities 15,689,555 2,534,530 16.2 20.9 17.39 (11,155) 34,472 34,472

North Fort Worth 1,286,830 48,484 3.8 3.8 19.08 (7,232) (4,488) (4,488)


South Fort Worth 6,756,657 474,315 7.0 7.2 20.55 46,521 44,918 44,918

Dallas Total 182,591,188 32,964,269 18.1 17.7 21.29 1,190,433 1,079,810 1,079,810

Fort Worth Total 35,677,691 5,394,258 15.1 15.4 19.42 98,304 136,588 136,588

Dallas / Fort Worth Total 218,268,879 38,358,527 17.6 18.3 20.7 1,288,737 1,216,398 1,216,398

MARKETVIEW


LEASE RATES

CONSTRUCTION









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$/SF


MARKETVIEW







Libitzky Property Companies LaSalle Investment Management Feb-2015 238,051 Canal Centre A

Bradford Companies Hines Feb-2015 218,943 Citymark A

The Aztec Fund American Realty Jan-2015 206,000 AT&T Pinnacle Park A

HighBrook Investment Folsom Companies Jan-2015 192,912 Greenway Tower B

Piedmont Office Realty Trust Dividend Capital Jan-2015 177,169 Park Place On Turtle Creek A

MARKETVIEW


CONTACTS

CBRE OFFICES


MARKETVIEW

2014 is highest year for DFW

office net absorption since

2006. Rent growth accelerates



18.4%


20.68 $/SF 343,496 SF

• Annual year-over-year employment growth

throughout Dallas/Fort Worth (DFW) remained strong

through October 2014 with 3.7% growth,

representing 115,800 new jobs.

• The largest office sale that transacted over the quarter

was the purchase of Quorum Office Portfolio that

included 5000 Quorum, Quorum North and Quorum

Place by DRA.

• Moody's Analytics forecasts gross metro product to

grow 5.7% in 2015 and 6.4% in 2016 for the DFW

metro.

• Q4 2014 saw an increase in new completions and a

slightly slowed pace of new construction starts. The

under construction pipeline remained above 7.1 million

sq. ft. over the quarter, driven by activity in suburban

markets.

• Market wide vacancy rose in Q4 2014 with an 18.4 %

vacancy rate, nine months after vacancy dipped below

18% for the first time since 2008.

• Net absorption throughout the DFW office market


quarter dating to Q3 2010.

17

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2007 2008 2009 2010 2011 2012 2013 2014




1,035,636 SF


MARKETVIEW



.



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Job Count 000’s Unemployment Rate (%)

Source: Bureau of Labor Statistics, October 2014. Seasonally Adjusted Non-Farm Employment.

USA Texas

DFW DFW Jobs


MARKETVIEW



Market

Net Rentable

Area (SF)

Direct Vacancy

(SF)

Direct Vacancy Rate (%)

Total Vacancy

Rate (%)

Annual Average Asking

Lease Rate ($/SF)

Qtr. Direct Net Absorption

(SF)

Qtr. Total Net

Absorption (SF)

2014 Total Net

Absorption (SF)


Dallas CBD 28,945,394 6,889,964 23.8 24.3 21.42 (216,524) (230,074) 311,237

East Dallas 3,817,856 533,120 14.0 14.0 15.51 62,763 62,763 185,506

Far North Dallas 38,360,653 5,408,405 14.1 15.8 21.70 437,545 377,152 1,042,563

Las Colinas 30,027,716 4,693,501 17.1 17.3 22.36 476,037 253,855 668,753

LBJ Freeway 19,696,437 5,056,267 25.7 25.9 18.38 77,523 64,018 217,609

Lewisville / Denton 4,633,447 758,434 16.4 16.6 18.64 (161,262) (161,262) (24,172)

Preston Center 3,860,276 355,488 9.2 9.4 32.08 (46,254) (46,254) (63,188)

Richardson / Plano 20,671,623 2,946,536 14.3 15.0 19.19 (51,962) (53,911) 358,018

SW Dallas 1,665,033 166,506 10.0 10.0 15.52 22,208 22,208 70,590

Stemmons Freeway 10,007,113 2,841,739 28.4 29.2 13.56 (124,488) (75,712) (65,606)

Uptown / Turtle Creek 10,371,340 1,196,416 11.5 12.4 33.75 54,322 23,635 (16,069)

Fort Worth CBD 9,438,193 1,397,118 14.8 15.0 26.27 38,481 35,568 181,797

Mid Cities 15,739,212 2,523,375 16.0 21.0 17.56 (15,535) (16,909) 268,976

North Fort Worth 1,286,830 41,252 3.2 3.4 18.58 3,728 3,728 (4,612)


South Fort Worth 6,789,325 520,836 7.7 7.8 19.88 39,107 33,342 13,589

Dallas Total 183,499,602 33,016,636 18.0 18.9 21.07 551,940 278,004 2,799,618

Fort Worth Total 35,091,998 4,824,544 13.7 16.1 19.36 70,506 65,492 480,383

Dallas / Fort Worth Total 218,591,600 37,841,180 17.3 18.4 20.68 622,446 343,496 3,280,001



MARKETVIEW


LEASE RATES

CONSTRUCTION






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MARKETVIEW







DRA Advisors Harbert Management Corporation Nov-2014 465,703 14901, 5000 Quorum Dr. & 15301 Spectrum Dr.

B

KBS Realty MetLife, Inc. Oct-2014 295,809 Turtle Creek Center A

Pillar Commercial StreamCo. Nov-2014 228,400 Collins Square B

Thomas Hartland-Mackie Gannett Co., Inc. Oct-2014 224,824 Belo Building A

Regent Properties, Inc. Boxer Property Oct-2014 208,450 One Panorama Center A

MARKETVIEW


CONTACTS

CBRE OFFICES


CBRE Global Research and Consulting

Dallas/Fort Worth Office MarketView Q3 2014

Directional arrows based on change from the previous quarter except where noted

© 2014, CBRE, Inc.

17%

18%

19%

20%

21%

22%

(1,200)

(800)

(400)

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

2007 2008 2009 2010 2011 2012 2013 2014

Absorption Sq. Ft. Vacancy Rate

000'

s

Source: CBRE Research, Q3 2014. Q1 Q2 Q3 Q4 Total Annual Absorption Vacancy Rate

The Dallas/Fort Worth office market experienced its 17th consecutive quarter of favorable leasing fundamentals in Q3 2014 and appears poised for a strong second half of 2014. Q3 2014 yielded the most net absorption in a single quarter this far in 2014, increasing to approximately 1.4 million sq. ft. Year-to-date, market net absorption totals just under three million sq. ft. Q3 2014 had nearly half the deliveries of Q2 2014. Pre-leasing among delivered construction is currently 14%, contributing to overall market vacancy. Average asking rental rates have experienced an accelerated rate of growth from Q3 2013 to Q3 2014.

Demand was strong among several submarkets in Q3 2014 especially CBD, Far North Dallas and Mid-Cities. Santander’s large move to Thanksgiving Tower contributed to the decrease in vacancy in CBD. The much anticipated move for Toyota has begun. Toyota has taken occupancy within Far North Dallas


of their temporary space while their build-to-suit headquarters gets underway. Mid-Cities high absorption was mostly contributed to the aggregate amount of smaller move-ins.

DFW employment continued to show a healthy rate of expansion for the 12 months ending July 2014, at 3.9% or 120,800 new jobs. The Professional & Business Services sector led all other industries in year-over-year employment change with 44,510 jobs added, followed by Wholesale Trade with 14,420 annual jobs added. As DFW’s two leading industries, both sectors experienced industry growth at nearly double the pace of the overall market. Professional & Business Services and Wholesale Trade both grew by more than 8.5% year-over-year. All but two industries (Manufacturing and Financial Activities) posted job gains for this same time period.

Figure 1: Quick Stats

Q3 2014 Q-o-Q Y-o-Y

Total Vacancy 18.2% $ 1

Lease Rates $20.41 per SF # #

Net Absorption 1,392,033 SF # $

Under Construction 7,555,676 SF # #

Delivered Construction 519,186 SF # $

OFFICE CONSTRUCTION IN DFW TOPS SEVEN MILLION SQ. FT. IN Q3 2014. RENT GROWTH ACCELERATES.

18.2% 7,555,676 Sq. Ft. 519,186 Sq. Ft. 32% Y-o-Y 5.1% 120,800 Y-o-Y

Hot Topics• Annual year-over-year employment growth

throughout Dallas/Fort Worth remained strong through July 2014 with 3.9% growth, repre-senting 120,800 new jobs.

• Moody’s Analytics forecasts 3.6% growth in 2015 and 4.0% growth in 2016 for the Dallas metro division and 3.9% and 3.7% for the Fort Worth metro division.

• Net absorption throughout the DFW office market continued to trend positively for the 17th consecutive quarter dating to Q3 2010.

• Marketwide vacancy declined in Q3 2014 with an 18.2 % vacancy rate, six months after vacancy dipped below 18% for the first time since 2008.

• The largest office sale that transacted over the quarter was the purchase of Solana by The Blackstone Group. The Westlake business park is a 14-building campus style property.

• An increase in new completions did not slow the pace of new construction starts, as the under construction pipeline broke over 7.5 million sq. ft. over the quarter, driven by activity in suburban markets.


JOB GROWTHCONSTRUCTION TRADE VOLUMEVACANCY RATE DELIVERIES UNEMPLOYMENT

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Source: Bureau of Labor Statistics, August 2014. Seasonally Adjusted Non-Farm Employment.


Figure 3: Dallas Office Market

In July 2014, year-over-year seasonally adjusted unem-ployment dropped once again across the board for DFW, Texas and the United States. The unemployment rate in DFW fell 120 basis points (bps) from the July 2013 level and now stands at 5.1%, which is the same rate as Texas and well below the U.S., at 6.2%. Seasonally adjusted, an-nual employment growth in the DFW metro area was 3.9% for the 12 months ending July 2014, equating to a total of 120,800 jobs. The industries that had the strongest job growth rates during this 12-month time period were Professional & Business Services (9.2%), Wholesale Trade (8.6%), and Natural Resources & Mining (7.4%).

DFW is currently the fourth largest MSA in the country and is notorious for being one of the fastest growing metro areas as well. Dallas/Fort Worth currently has an estimated population of 6.8 million, which is 33% higher than in 2000. Furthermore, Claritas projects a population of 7.4 million in DFW by 2019, which equates to a growth rate of 8.6% over the next four years. Comparatively, the national five-year projected population growth rate is only 3.5%. DFW’s population currently averages an age of 39 with half of the population in their prime earning years of 20-54. DFW residents tend to earn more income than the national average, as evidenced by an estimated median household income of $56,065 as of Q3 2014, compared to $51,352 in the U.S.

Market (See Map on back)

Net Rentable

Area Sq. Ft.

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Annual Avg Asking Lease

RatePer Sq. Ft.

QtrDirect Net Absorption

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QtrTotal Net

AbsorptionSq. Ft.

2014 YTDTotal Net

AbsorptionSq. Ft.

Central Expressway 11,484,694 2,213,977 19.3% 20.2% $21.54 38,751 14,676 72,791 Dallas CBD 29,415,642 6,797,841 23.1% 23.7% $21.13 462,671 529,030 541,311 East Dallas 3,970,812 570,772 14.4% 14.5% $16.35 26,797 28,109 122,743 Far North Dallas 37,968,533 5,262,596 13.9% 15.2% $21.45 533,325 379,614 665,411 Las Colinas 29,637,037 5,059,414 17.1% 17.3% $21.66 89,888 77,290 414,898 LBJ Freeway 19,800,000 5,227,682 26.4% 26.6% $18.17 (136,465) 103,826 153,591 Lewisville / Denton 4,665,127 615,165 13.2% 13.4% $18.51 22,980 20,429 137,090 Preston Center 3,860,096 299,810 7.8% 7.9% $31.37 3,136 2,378 (16,934)Richardson / Plano 20,668,850 2,867,297 13.9% 14.6% $20.43 69,299 56,360 411,929 SW Dallas 1,665,033 173,955 10.4% 10.4% $15.59 4,056 4,056 48,382 Stemmons Freeway 10,046,431 2,702,621 26.9% 28.2% $13.65 12,300 11,378 12,650 Uptown / Turtle Creek 10,353,638 1,140,150 11.0% 11.4% $32.49 (112,145) (115,750) (39,704)

Fort Worth CBD 9,388,949 1,375,851 14.7% 14.8% $26.35 60,457 42,386 146,229 Mid Cities 15,840,795 2,463,476 15.6% 20.4% $17.66 215,955 229,854 285,885 North Fort Worth 1,132,767 44,980 4.0% 4.2% $18.80 1,888 1,888 (8,340)Northeast Fort Worth 1,868,438 346,688 18.6% 18.8% $17.27 3,490 3,490 10,870 South Fort Worth 6,843,285 554,436 8.1% 8.3% $19.86 2,333 3,019 (19,753)Dallas Total 183,535,893 32,931,280 17.9% 18.6% $20.62 1,014,593 1,111,396 2,524,158Fort Worth Total 35,074,234 4,785,431 13.6% 16.0% $19.34 284,123 280,637 414,891Dallas / Fort Worth Total 218,610,127 37,716,711 17.3% 18.2% $20.41 1,298,716 1,392,033 2,939,049


OFFICE THIRD QUARTERMARKETVIEW


ECONOMIC CONDITIONS/DEMOGRAPHICS

Source: Bureau of Labor Statistics, August 2014.Seasonally Adjusted Non-Farm Employment.

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During Q3 2014, market-wide vacancy decreased 50 bps as large tenants took occupancy throughout the DFW market. Q1 2014 was the first time the market had seen sub-18% vacancy since 2008, when vacancy reached its pre-recession low. After Q1 2014, there have been substantial deliveries in the DFW office market that were not pre-leased prior to completion, thus contributing to the increase in vacancy since Q1 2014. DFW experienced its 17th consecutive quarter of positive net absorption, which totaled 1,392,033 sq. ft. for the quarter. Net absorption was higher this quarter than in Q1 2014 and Q2 2014, and has not reached this level since Q3 2013. Of this total, 1,298,716 sq. ft. was attributed to direct net absorption, while sublet absorption added 93,317 sq. ft., resulting in nearly 1.4 million sq. ft. of positive net absorption for the quarter. A significant amount of move-ins occurred in Dallas CBD and the suburban submarkets of Far North Dallas and Mid-Cities. Several moderately sized move-ins created a positive, aggregate impact in the LBJ Freeway submarket, while 2900 Ranch Trail in Las Colinas delivered 100% preleased over the quarter, attributing 30,000 sq. ft. of absorption.


Figure 6: Asking Lease Rates, Annual per Sq. Ft.






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Asking rents continued to experience growth, with the overall market average rising moderately to $20.41 per sq. ft. in Q3 2014 from $20.07 per sq. ft. in Q2 2014 on a gross basis. Class A rates increased at an especially strong pace, rising from $24.15 per sq. ft. to $26.39 per sq. ft. for the same timeframe. All office classes recorded an increase in lease rates for the last 12 months leading to an overall market growth rate of 10.9%. Year-over-year, asking lease rates in the submarkets of Northeast Fort Worth, Uptown/Tur-tle Creek, and East Dallas have risen by the largest margin, ranging from 4.2% to 21.0% growth. Inversely, quoted rates have fallen throughout South Fort Worth with declines posted at -0.21% and an unchanged percentage for the Stemmons Freeway submarket.

In Q3 2014, the total office square footage under construction exceeded seven million sq. ft., the highest peak since Q1 1999, a 14-year high for DFW office under construction. The bulk of this activity is concentrated in the suburban submarkets of Richardson/Plano and Far North Dallas, with approximately 63.4% of the total pipeline square footage already pre-leased. Significant new proj-ects that broke ground this quarter include 1717 E. Cityline Drive, Raytheon’s future headquarters, Granite Park V and State Farm’s additional 500,000 sq. ft. build-to-suit for their corporate campus. Construction starts for the quarter totaled 2,366,500 sq. ft., while nine buildings were completed during Q3 2014, totaling 519,186 sq. ft. These deliveries included Dominion Legacy, Cascades at the Colony Buildings 7-10, Cheddar’s 30,000 sq. ft. build-to-suit in Cypress Waters, a Cypress Waters 188,400 sq. ft. spec building (8951 Cypress Waters) and Coppell Commerce Center II A and B. All projects that delivered are Class B properties except Dominion Legacy and 8951 Cypress Waters, which are both Class A.


LEASE RATES

CONSTRUCTION

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Buyer Seller Date Bldg Sq. Ft. Property Name Class

The Blackstone Group CWCapital Asset Management Aug-2014 1,783,419 Solana Business Park A

Olymbec Group Berkeley Investments Jul-2014 1,340,481 1700 Pacific Ave. A

PIMCO Parmenter Realty Partners Jul-2014 845,919 Park Central 7-9 A

Spear Street Capital"Champion Partners & Long Wharf Real Estate Partners”

Sep-2014 801,923 Galatyn Park A

MetLife Core Property Holdings

Hines Sep-2014 215,499 Plaza at Legacy A

Investment activity in DFW has remained at high levels with healthy sales volume across all asset classes. It is the continuation of “the perfect storm”-- investor demand and attractive financing meet asset pricing supported by strong market fundamentals.

With an avalanche of capital raised globally for real estate investments, sales activity has been strong across the entire risk spectrum, from core to value-add and opportunistic. Furthermore, the buyer pool has deepened with the appearance of new domestic and international investors who are being out-priced in coastal markets and are attracted by the national reporting on the growth opportunities supported by a strong state and local economy.

The real estate debt capital markets are also quite active throughout the DFW area and the state of Texas. Capital is plentiful for all property types and for loan terms from two to thirty years. The commercial banks remain very aggressive and many provide nonrecourse financing. Life companies and CMBS are also active and many have targeted Texas specifically for increased loan volume. In addition to a full spectrum of lenders actively competing in the marketplace, the historically low price of debt capital is helping to fuel strong gains in pricing across all property types.

In Q3 2014, notable office transactions include two properties along LBJ Freeway, a Mid-Cities asset and properties in the Far North Dallas and South Fort Worth submarkets. In August 2014, Solana Business Park in Westlake was purchased by New York-based Blackstone Group. The group purchased the 14-building campus-style property out of foreclosure for $180 million. The Blackstone Group plans to spend about $110 million in renovations on the business park. This transaction is one of many that identifies the lucrative opportunities within the DFW market. 1700 Pacific Avenue, a 49-story tower located in Dallas CBD, was purchased by a Canadian investor, the Montreal-based Olymbec Group, who acquired the property from sellers Berkeley Investments out of Boston, Massachusetts.

Park Central 7-9 is a three-building, 845,919 sq. ft. complex in the East LBJ Freeway micro-market that was purchased by institutional investment firm Parmenter Realty Partners, based in Miami.

Galatyn Park is a four building complex totaling over 800,000 square feet and resides among an eighty acre mixed-use development in Richardson, TX. The

Figure 8: Top Transactions

purchaser, Spear Street Capital, is a domestic real estate investment company with offices in San Francisco and New York.

Plaza at Legacy was purchased by MetLife Core Property Holdings. The 7-story office tower was bought from Hines, who build the property in 2001.

THE DRAMATIC SHIFT IN LENDER APPETITES AND CORRELATED COMPRESSION IN MORTGAGE INTEREST RATES HAVE BEEN VERY BENEFICIAL TO COMMERCIAL REAL ESTATE.



Source: BizJournals.com, September 2014 DallasNews, September 2014

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Lynn CirilloResearch Operations ManagerCBRE Americas Research2800 Post Oak, Suite 2300Houston, TX 77056e: [email protected]

Lauren Paris Senior Research AnalystCBRE Dallas Research2100 McKinney Ave, Suite 700 Dallas, TX 75201t: +1 214 979 6587 e: [email protected]

Casey RendonResearch CoordinatorCBRE Dallas Research2100 McKinney Ave, Suite 700 Dallas, TX 75201t: +1 214 979 6530 e: [email protected]

CONTACTSFor more information about this Dallas/Fort Worth MarketView, please contact:

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GLOBAL RESEARCH AND CONSULTING This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

DISCLAIMER

Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

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Dallas/Fort Worth Offi ce MarketViewQ2 2014

Directional arrows based on change from the previous quarter except where noted

© 2014, CBRE, Inc.

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The Dallas/Fort Worth offi ce market experi-enced its 16th consecutive quarter of favor-able leasing fundamentals in Q2 2014 and appears poised for another year of solid growth. Q2 2014 yielded less net absorption than Q1 2014, but demand was still solid at approximately 400,000 sq. ft. Q2 2014 nearly doubled in deliveries over Q1 2014, however pre-leasing within buildings new to market was relatively low, contributing to the increase in overall market vacancy. Average asking rental rates increased by 2.5% from Q2 2013 to Q2 2014.

Although the pace of job growth slowed from October 2013, DFW employment continued to show a healthy rate of expansion for the 12 months ending April 2014, at 3.5% or


106,800 new jobs. The Professional & Busi-ness Services sector led all other industries in year-over-year employment change with 28,720 jobs added, followed by the Leisure & Hospitality with 18,870 annual jobs added. As DFW’s two leading industries, both sectors experienced industry growth at nearly double the pace of the overall market. Professional & Business Services and Leisure & Hospitality both grew 6.0% year-over-year and added a combined 47,490 jobs. All but two industries (manufacturing and mining) posted job gains

for this same time period.

Figure 1: Quick Stats

Q2 2014 Q-o-Q Y-o-Y

Total Vacancy 18.7% # $

Lease Rates $20.07 per sq. ft. 1 #

Net Absorption 410,163 sq. ft. $ #

Under Construction 5 million sq. ft. $ #

Delivered Construction 927,163 sq. ft. # #

OFFICE CONSTRUCTION IN DFW TOPS 4.9 MILLION SQ. FT. IN Q2 2014. VACANCY AND RENTAL RATES SHOW MIXED SIGNALS.

18.7% 4,993,837 Sq. F t. 927,163 Sq. Ft. -36% Y-o-Y 5.2% 106,800 Y-o-Y

Hot TopicsAnnual year-over-year employment growth through-out Dallas/Fort Worth remained strong through April 2014 with 3.5% growth, representing 106,800 new jobs.

The two-year employment outlook for the Dallas and Fort Worth metro divisions is 3% growth per year, as forecasted by Moody’s Analytics.

Net absorption throughout the DFW offi ce market continued to trend positively for the 16th consecutive quarter dating to Q3 2010.

Marketwide vacancy edged back up to 2013 levels after Q1 2014 dipped below 18% for the fi rst time since 2008.

The largest offi ce sale that transacted over the quar-ter was the purchase of Fountain Place by Goddard Investment Group. The Dallas offi ce tower is located in the Dallas CBD.

An increase in new completions did not slow the pace of new construction starts, as the under construction pipeline hovered around 5 million sq. ft. over the quarter, driven by activity in suburban markets.


JOB GROWTHCONSTRUCTION TRADE VOLUMEVACANCY DELIVERIES UNEMPLOYMENT

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Figure 3: Market Statistics

In April 2014, year-over-year seasonally adjusted unem-ployment dropped once again across the board for DFW, Texas and the United States. The unemployment rate in DFW fell 100 basis points (bps) from April’s 2013 level and now stands at 5.2%, which is same rate as Texas and well below the U.S., at 6.3%. Seasonally adjusted, annual employment growth in the DFW metro area was 3.5% for the 12 months ending April 2014, equating to a total of 106,800 jobs. The industries that had the strongest job growth rates during this 12-month time period were Lei-sure & Hospitality (6.0%), Professional & Business Services (6.0%), Construction (5.7%) and Transportation, Ware-housing & Utilities (4.8%).

DFW is currently the fourth largest MSA in the country and is notorious for being one of the fastest growing metro areas as well. Dallas/Fort Worth currently has an estimated population of 6.8 million, which is 33% higher than in 2000. Furthermore, Claritas projects a population of 7.4 million in DFW by 2019, which equates to a growth rate of 8.6% over the next four years. Comparatively, the national fi ve-year projected population growth rate is only 3.5%. DFW’s population currently averages an age of 39 with half of the population in their prime earning years of 20-54. DFW residents tend to earn more income than the national average, as evidenced by an estimated median household income of $56,065 as of Q2 2014, compared to $51,352 in the U.S.

Market(See Map on back)

Net Rentable

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RatePer Sq. Ft.

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Sq. Ft.

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AbsorptionSq. Ft.

Central Expressway 11,683,510 2,252,728 19.3% 19.9% $21.24 35,303 1,917 58,115 Dallas CBD 28,637,303 7,153,302 25.0% 25.8% $20.60 20,027 (23,445) 12,281 East Dallas 3,914,818 597,569 15.3% 15.4% $15.69 75,250 75,858 94,634 Far North Dallas 37,948,792 5,514,857 14.5% 15.8% $20.97 214,335 170,109 285,797 Las Colinas 29,492,886 4,877,537 16.5% 16.7% $21.18 (34,983) (13,015) 337,608 LBJ Freeway 19,753,628 5,091,217 25.8% 27.2% $17.89 68,132 65,142 49,765 Lewisville / Denton 4,626,163 618,638 13.4% 13.5% $18.45 (36,700) (38,374) 116,661 Preston Center 3,860,000 331,146 8.6% 8.7% $30.69 (22,296) (22,646) (19,312)Richardson / Plano 20,821,770 2,936,596 14.1% 14.7% $18.59 24,609 20,406 355,569 SW Dallas 1,665,033 178,011 10.7% 10.7% $15.57 22,346 22,346 44,326 Stemmons Freeway 10,092,068 2,708,579 26.8% 28.1% $13.65 68,464 68,464 (1,272)Uptown / Turtle Creek 10,346,569 1,048,490 10.1% 10.5% $30.78 93,631 105,769 76,046

Fort Worth CBD 9,388,949 1,503,904 16.0% 16.0% $25.95 9,510 24,160 103,843 Mid Cities 15,832,231 2,679,431 16.9% 21.9% $17.63 6,508 (15,456) 56,031 North Fort Worth 1,096,767 28,868 2.6% 2.9% $18.53 (10,228) (10,228) (10,228)Northeast Fort Worth 1,922,379 350,178 18.2% 18.5% $14.27 2,577 5,820 7,380 South Fort Worth 6,972,387 556,769 8.0% 8.2% $19.90 (26,160) (26,664) (22,772)Dallas Total 182,842,540 33,308,670 18.2% 19.0% $20.19 528,118 432,531 1,410,218Fort Worth Total 35,212,713 5,119,150 14.5% 16.8% $19.34 (17,793) (22,368) 134,254Dallas / Fort Worth Total 218,055,253 38,427,820 17.6% 18.7% $20.07 510,325 410,163 1,544,472


OFFICE SECOND QUARTERMARKETVIEW


ECONOMIC CONDITIONS/DEMOGRAPHICS

Source: CBRE Research, Q2 2014.Seasonally Adjusted Non-Farm Employment.

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During Q2 2014, market-wide vacancy increased 80 bps as large deliveries with high speculative availability came to market. Q1 2014 was the fi rst time the market had seen sub-18% vacancy since 2008, when vacancy reached its pre-recession low. After Q1 2014, there were substantial deliveries in the DFW offi ce market that were not pre-leased prior to completion, thus contributing to the increase in vacancy. The vacancy increase did not undermine the positive net absorption, which totaled 410,163 sq. ft. for the quarter. Even though net absorption was lower this quarter than in Q1 2014, it remains in line with previous quarters. Of this total, 510,325 sq. ft. was attributed to direct net absorption, while sublet absorption was negative at (100,062) sq. ft., resulting in positive net absorption for the quarter. A signifi cant amount of move-ins for the quarter occurred in the suburban submarkets of Uptown/Turtle Creek and East Dallas. Several moderately sized move-ins created a positive, aggregate impact in Uptown/Turtle Creek submarket, while Trend Tower in East Dallas delivered in Q2 attributing to 90,857 sq. ft. of absorption.


Figure 6: Gross Avg. Annual Asking Rates, per Sq. Ft.






15%

16%

17%

18%

19%

20%

21%

22%

23%

(1,500)

(1,000)

(500)

0

500

1,000

1,500

2,000

Q1

2008

Q

2 20

08

Q3

2008

Q

4 20

08

Q1

2009

Q

2 20

09

Q3

2009

Q

4 20

09

Q1

2010

Q

2 20

10

Q3

2010

Q

4 20

10

Q1

2011

Q

2 20

11

Q3

2011

Q

4 20

11

Q1

2012

Q

2 20

12

Q3

2012

Q

4 20

12

Q1

2013

Q

2 20

13

Q3

2013

Q

4 20

13

Q1

2014

Q

2 20

14

Vacancy Rate Net Absorption Sq. Ft.

000'

s

Direct Absorption Sq. Ft. Total Absorption Sq. Ft. Direct Vacancy Rate Total Vacancy Rate

$16

$17

$18

$19

$20

$21

$22

$23

$24

Q1

2008

Q

2 20

08

Q3

2008

Q

4 20

08

Q1

2009

Q

2 20

09

Q3

2009

Q

4 20

09

Q1

2010

Q

2 20

10

Q3

2010

Q

4 20

10

Q1

2011

Q

2 20

11

Q3

2011

Q

4 20

11

Q1

2012

Q

2 20

12

Q3

2012

Q

4 20

12

Q1

2013

Q

2 20

13

Q3

2013

Q

4 20

13

Q1

2014

Q

2 20

14

Class A Class B Overall Avg. Asking Rate

0

1,000

2,000

3,000

4,000

5,000

6,000

Q1

2008

Q

2 20

08

Q3

2008

Q

4 20

08

Q1

2009

Q

2 20

09

Q3

2009

Q

4 20

09

Q1

2010

Q

2 20

10

Q3

2010

Q

4 20

10

Q1

2011

Q

2 20

11

Q3

2011

Q

4 20

11

Q1

2012

Q

2 20

12

Q3

2012

Q

4 20

12

Q1

2013

Q

2 20

13

Q3

2013

Q

4 20

13

Q1

2014

Q

2 20

14

000'

s

Under Construction Sq. Ft. Delivered Construction Sq. Ft.

Growth in overall asking rents continued to increase, the market average rose marginally to $20.07 per sq. ft. in Q2 2014 from $20.06 per sq. ft. in Q1 2014 on a gross basis. Class A rates increased at an especially strong pace of 3.0%, rising from $23.98 per sq. ft. to $24.15 per sq. ft. All offi ce classes recorded an increase in lease rates for the last 12 months leading to an overall market growth rate of 2.5%. Over the last 12 months, asking lease rates in the submarkets of LBJ Freeway, Dallas CBD, Central Expressway and Uptown/Turtle Creek have risen by the largest margin, ranging from 4.2%-to-8.1% growth. Inversely, quoted rates have fallen throughout Las Colinas and North Fort Worth, with declines posted at 3.7% and 0.2%, respectively.

In Q2 2014, the total offi ce square footage under construction exceeded 4.9 million sq. ft. and maintained its 4th consecutive quarter above 4.4 million sq. ft.The bulk of this activity is concen-trated in the suburban submarkets of Richardson/Plano and Las Colinas, with approximately 62.5% of the total pipeline square foot-age already pre-leased. Signifi cant new projects that broke ground this quarter include two additional buildings at Cypress Waters in Las Colinas, Crescent’s new development at McKinney & Olive, and Mercer Business Park’s build-to-suit for Monitronics. Construction starts for the quarter totaled 850,585 sq. ft., while fi ve buildings were completed during Q2 2014, totaling 927,163 sq. ft. These deliveries included Granite Park IV, International Business Park IV, Trend Tower in East Dallas, Lincoln Legacy Two and 3001 Dallas Parkway. The latter two projects delivered entirely spec and are both located in Far North Dallas.


LEASE RATES

CONSTRUCTION

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Date Bldg Sq. Ft. Property Name Class

Figure 8: Top Transactions

Buyer Seller

Goddard Investment Group JPMorgan Chase & Co Jun-2014 1,200,266 Fountain Place A

Deutsche Asset & Wealth Franklin Street Properties Jun-2014 379,518 Galleria North Tower I A

CapRidge Partners Codina Partners Jun-2014 262,962 Crestview Office Tower A

Trish McGilvery Orda Corporation Jun-2014 97,313 Prestonwood Place B

Champion Partners Foreclosure May-2014 376,710 3500 Maple Avenue A

There has been a strong increase in the flow of capital to commercial real estate generally, and to high-quality assets with upside in particular. The effects of modestly higher interest rates are more likely to be felt in commodity, net-lease and secondary-market trades, while core assets of all types are seeing minimal pullback.

An increasing number of buyers are submit-ting off-market offers in hopes of pre-empting competition for attractive assets. The goal is not to secure favorable pricing as much as the desire to be successful in placing capital. Pricing is not moving to an unsupportable level, but the trend is reflective of a competi-tive landscape.

A positive trend in office is the ability to make a deeper market for suburban office. For the last few years, bid depth and quality has been a persistent problem for stabilized suburban office. Over the last few months, this has begun to shift with more bids per asset and an increase in bidder quality.

In the debt market, most life companies expect 2014 allocations that are 10% to 15% above 2013 production. Debt capital is avail-able and plentiful, but the best priced money is selective and focused on quality. The dra-

matic shift in lender appetites and correlated compression in mortgage interest rates have been very beneficial to commercial real estate in the past couple years.

In Q2 2014, notable office transactions include two Far North Dallas, a Dallas CBD asset and properties in the Las Colinas, and Uptown/Turtle Creek submarkets. In June, Crestview Office Tower in Las Colinas was purchased by Austin-based Capridge Partners for $34.5 million, which is anticipated to be the beginning of several acquisitions within DFW. The seller, Codina Partners, sold the property at 75% replacement value. This transaction is one of many that identifies the lucrative opportunities within the DFW market. 3500 Maple Ave, an 18-story tower located in Uptown, was purchased out of foreclosure by a New England-based investor who teamed up with Champion Partners to acquire the asset.

Fountain Place, a major Dallas landmark in the Dallas CBD submarket, is a 60-story, 1,200,266 sq. ft. property that was pur-chased by a Atlanta-based Goddard Invest-ment Group LLC from JPMorgan Chase & Co. Goddard plans to renovate the 1980’s office tower.

Galleria North Tower I, a 16-story Class A asset in Far North Dallas, has 379,518 sq. ft. of rentable space and sold in June 2014 by Franklin Street Properties to Germany-based Deutsche Asset & Wealth. The property is 87.2% occupied and includes executive park-ing beneath the building.

AN INCREASING NUMBER OF BUYERS ARE SUBMITTING OFF-MARKET OFFERS IN HOPES OF PRE-EMPTING COMPETITION FOR ATTRACTIVE ASSETS.



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Lynn CirilloResearch Operations ManagerCBRE Americas Research2800 Post Oak, Suite 2300Houston, TX 77056e: [email protected]

Lauren ParisSenior Research AnalystCBRE Dallas Research2100 McKinney Ave, Suite 700Dallas, TX 75201t: +1 214 979 6587e: [email protected]

Casey RendonReseach CoordinatorCBRE Dallas Research2100 McKinney Ave, Suite 700Dallas, TX 75201t: +1 214 979 6530e: [email protected]

CONTACTSFor more information about this Dallas/Fort Worth MarketView, please contact:

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GLOBAL RESEARCH AND CONSULTINGThis report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

Additional U.S. research produced by Global Research and Consulting can be found at www.cbre.us/research.

DISCLAIMER

Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy,

we have not verifi ed it and make no guarantee, warranty or representation about it. It is your responsibility to confi rm independently its accuracy

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CPPNJOH NBSLFU %BMMBT 'PSU 8PSUI %'8 IBT … · written permission of CBRE. MARKETVIEW DALLAS / FORT WORTH OFFICE Average Asking Rate Direct Annual Lease Rates, NNN, Modified Gross