Migration to efficient, pricier space results in down quarter · been the trend for the past six quarters, Class A has seen strong activity, and class B has been lackluster or negative

Migration to efficient, pricier space results in down quarter

Research & Forecast Report

DALLAS-FORT WORTH | OFFICEQ2 2018

Mike Otillio Director of ResearchKari Beets Business Development and Content Strategist

The tight labor market is causing office tenants to rethink their real estate. With national unemployment at 3.6%, and DFW unemployment even lower at 3.4%, competition is fierce for top talent, and occupiers are thinking about real estate as a recruiting asset rather than a cost center. This is evidenced by tenants willing to pay more than $50 per square foot for new builds in the vibrant Uptown submarket and the amenity-rich Legacy area that is commanding all-in rents of $40-45.

While demand numbers appeared lackluster in Q2 2017, it is not a sign of underlying weakness. Las Colinas and Uptown, the markets worst-hit this quarter, experienced large move-outs that had an outsized impact because of timing. In Las Colinas, Nationstar Mortgage vacated 293,000 square feet of sublease space, but will be moving next quarter, causing a true net loss of only 50,000 square feet. Signet Jewelers vacated its headquarters in Q2, but is in the process of moving to Cypress Waters. In Uptown, Guidestone Financial Services vacated 2401 Cedar Springs in its move to Far North Dallas, and after renovation, the property will be returned to the market with higher rental rates. Without this move-out, Uptown would have posted 40,000 square feet in net absorption. Competition is still fierce for premium office space, but investors are striving to meet demand through renovations and repositioning tired office parks.

A Look Ahead> Net absorption will continue to pick up over the next two

quarters because of steady job growth and 1.2 million square feet of leased space that will be delivered by year end. 2018 only had one huge move-in from Liberty Mutual, so this year will be closer to 3 million square feet of absorption, rather than last year which posted almost 5 million square feet.

> As long as we continue on the upward trend economically, which we expect to continue through 2019, the flight to urban locations like Uptown and urban-suburban areas like Legacy and Las Colinas will continue. This trend will leave behind isolated 80s-vintage office buildings in the Mid-Cities and North US-75 Corridor unless they can reinvent themselves through mixed-use development.

Summary Statistics DFW Office Market

DFW Market

DFW Class A

DFW Class B

Vacancy Rate 16.7% 18.2% 16.7%

Change from prior Quarter 0.3% 0.2% 0.7%

Absorption (Thousand Square Feet) -72 629 -736

New Supply (Thousand Square Feet) 1,048 964 83

Under Construction (Thousand Square Feet) 8,311 7,566 745

Asking Rents Per Square Foot Per Year

Average Quoted (Gross) $25.87 $29.71 $21.06


Year-Over-Year Change 3.5% 3.1% 3.8%

Market IndicatorsRelative to prior period

AnnualChange

Quarterly Change

Quarterly Forecast*

Vacancy

Net Absorption

Under Construction

Rental Rate

*Projected

2 Dallas-Fort Worth Research & Forecast Report | Q2 2018 | Office | Colliers International

Market Highlights> Job growth in DFW picked up in Q2, as the metro added 122,000 jobs, an increase of

3.4% from May 2017 to May 2018. The metro continues to grow at a faster rate than Texas as a whole, which grew 2.8% annually.

> Developers are more cautious to start construction of speculative product than earlier in the cycle. Properties under construction at the end of Q2 2018 were 72% pre-leased, compared to 60% pre-leased a year prior.

Vacancy Rate

The vacancy rate shows slight signs of market softening, especially in Class B product. Total vacant space on the market increased by 1.1 million square feet, or 0.3% from Q1 to Q2 2018. Direct vacancies increased by 600,000 square feet, and sublet vacancies, which have been steadily increasing since Q2 2017, added an additional 470,000 square feet.

Class B vacancy rose 0.7% from Q1, up to 16.7%. Class B vacancy has been rising since Q4 2016, and the march to quality shows no signs of stopping. From half-year 2017 to Q2 2018, twelve of the seventeen submarkets have shown an increase in vacancy rate. Lewisville-Denton has seen the greatest increase in Class B vacancy, up over 10.6% from a year prior. Class A vacancy also has been increasing, rising 0.2% quarter-to-quarter. However, Class A vacancy was affected by properties that delivered but are not fully occupied yet, such as 1900 Pearl and Hall Park-T2, which have several leases signed but have not yet occupied.

Absorption & DemandDirect net absorption for Q2 2018 was 412,000 square feet, but negative absorption of 470,000 square feet swung total net absorption to negative 72,000 square feet. As has been the trend for the past six quarters, Class A has seen strong activity, and class B has been lackluster or negative. In Q2, Class A posted 629,000 square feet of new occupancy, and Class B lost 736,000 square feet of occupied space.

Las Colinas had the largest negative net absorption of 751,000 square feet. Affecting this total was Signet Jewelers’ move out of 347,000 in Class B product into 250,000 of Class A product in Cypress Waters and Nationstar Mortgage putting 293,000 square feet at 4000 Horizon Way up for sublease as it is moving to 244,000 square feet of Class A product at Lake Vista in July (Q3 2018).

Rental RatesAs vacancy ticks up, overall rental rate growth has been slowing. Rental rates averaged $25.87 overall, but almost half of submarkets posted a decrease in rates from prior quarter. Class A rates rose 1% to $29.71. Of major class A submarkets, Central Expressway has seen the greatest year-over-year increase in rental rates, with rates rising 9.5%. Renovations on Central Expressway have pushed rates higher, and demand has increased as tenants flee rising rates in Uptown and Preston Center. Despite the decline in activity in Class B space, rental rates haven’t dropped, rising 4% from the prior year to $21.06. On average the gap between Class A and Class B space was $8.65 in Q2 2018.

0%

5%

10%

15%

20%

-2,500

0

2,500

5,000

7,500

10,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

New Supply Net Absorption Vacancy Rate

Thou

sand

s of

Squ

are

Feet

Vaca

ncy

Rate

Job Growth & Unemployment(not seasonly adjusted)

Unemployment 5/2017 5/2018

DFW 3.6% 3.4%

Texas 4.1% 3.7%

U.S. 4.1% 3.6%

Job GrowthAnnual Change

# of Jobs Added

DFW 3.4% 122k

Texas 2.8% 345k

U.S. 1.6% 2,397k

Class A Office Rents & Vacancy

Class A, B & C Office Absorption

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

2014 2015 2016 2017 2018

Thou

sand

s of

Squ

are

Feet

Class A Class B Class C

New Supply, Absorption & Vacancy Rate

$15

$19

$23

$27

$31

$35

10%

12%

14%

16%

18%

20%

2010 2012 2014 2016 2018

Rent

al R

ate

(Gro

ss)

Vaca

ncy

Rate

Class A Rental Rate Total Market Rental RateClass A Vacancy Rate Total Market Vacancy Rate

3 Dallas-Fort Worth Research & Forecast Report | Q2 2018 | Office | Colliers International3

Dallas-Fort Worth Downtown & Suburban Office Market Summary

EXISTING PROPERTIES

Submarket BldgsTotal

InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF

VACANCY NET ABSORPTION

AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

DOWNTOWN AND SUBURBAN MARKETS

QUARTERLY AND ANNUAL HISTORICAL COMPARISONS

604,237,9922Q 8102 3,515 15.5% 1.3% 50,185,621 16.7% 16.4% 1,420,604 3,252,180 8,311,250(71,723) $ 25.87

954,486,8921Q 8102 3,504 15.3% 1.1% 49,065,951 16.4% 16.3% 1,492,327 2,204,233 8,680,2101,492,327 $ 25.62

622,084,6924Q 7102 3,495 15.3% 1.0% 48,354,045 16.3% 16.1% 4,852,901 7,976,444 10,048,3911,230,542 $ 25.39

315,421,4923Q 7102 3,479 15.2% 0.9% 47,228,874 16.1% 16.1% 3,622,359 5,620,731 11,744,249902,228 $ 25.37

989,301,3922Q 7102 3,466 15.4% 0.7% 47,110,578 16.1% 16.0% 2,720,131 4,600,207 8,837,9102,024,800 $ 24.97

247,384,6822Q 6102 3,413 15.2% 0.6% 45,101,728 15.7% 15.7% 795,708 2,458,980 11,314,053695,936 $ 23.73

120,127,0822Q 5102 3,367 14.4% 0.7% 42,391,873 15.1% 15.5% 3,316,589 3,284,902 7,032,0401,617,720 $ 22.23

255,170,6722Q 4102 3,325 15.3% 0.8% 44,410,720 16.1% 16.0% 2,586,848 1,538,492 5,770,109713,982 $ 20.97

477,223,3722Q 3102 3,295 16.2% 0.8% 46,552,253 17.0% 16.9% 238,893 611,011 2,720,264(210,236) $ 20.03

Class A23,407,62029 24.6% 2.3% 6,315,595 27.0% 27.4% 351,560 261,400 163,02595,743 $27.40Dallas CBD

6,182,69919 15.2% 0.0% 940,886 15.2% 13.4% 193,891 280,489 0129,095 $30.74Fort Worth CBD

29,590,31948 22.7% 1.9% 7,256,481 24.5% 24.6% 533,375 541,889 163,025224,838 $27.90Dallas Suburban

4,259,09527 17.9% 0.9% 803,686 18.9% 19.9% 134,719 40,000 200,00075,462 $22.33Fort Worth Suburban

151,650,152573 16.7% 1.5% 27,532,156 18.2% 18.0% 2,528,365 3,099,088 7,566,324628,779 $29.71Total DFW Market

Class B5,954,50435 15.3% 1.9% 1,025,706 17.2% 16.5% (63,636) 0 0(43,634) $20.99Dallas CBD

3,157,71039 10.5% 0.5% 346,015 11.0% 12.2% (41,916) 0 038,747 $21.05Fort Worth CBD

9,112,21474 13.6% 1.4% 1,371,721 15.1% 15.0% (128,590) 0 0(4,887) $21.00Dallas Suburban

11,164,509215 16.9% 0.5% 1,933,625 17.3% 17.8% 21,703 26,165 190,12053,719 $21.61Fort Worth Suburban

125,939,8432,098 15.4% 1.2% 20,986,038 16.7% 16.0% (1,226,870) 153,092 744,926(736,434) $21.06Total DFW Market

Class C2,840,38339 8.2% 0.0% 231,739 8.2% 9.1% 32,608 0 026,871 $18.33Dallas CBD

451,97818 3.1% 0.0% 14,050 3.1% 2.4% (3,190) 0 0(3,240) $18.80Fort Worth CBD

3,292,36157 7.5% 0.0% 245,789 7.5% 8.2% 29,418 0 023,631 $18.37Dallas Suburban

3,092,808156 5.3% 0.0% 163,497 5.3% 5.9% (11,330) 0 017,880 $18.91Fort Worth Suburban

22,142,411844 7.5% 0.0% 1,667,427 7.5% 7.7% 119,109 0 035,932 $18.49Total DFW Market

All Classes32,202,507103 21.5% 2.1% 7,573,040 23.5% 23.8% 320,532 261,400 163,02578,980 $26.42Dallas CBD

9,792,38776 13.1% 0.2% 1,300,951 13.3% 12.5% 140,225 280,489 0164,602 $28.61Fort Worth CBD

41,994,894179 19.5% 1.6% 8,873,991 21.1% 21.2% 460,757 541,889 163,025243,582 $26.77Dallas Suburban


299,732,4063,515 15.5% 1.3% 50,185,621 16.7% 16.4% 1,420,604 3,252,180 8,311,250(71,723) $25.87Total DFW Market


Dallas-Fort Worth Office Submarket Summary

EXISTING PROPERTIES

Colliers Markets BldgsTotal

InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A

528,101,7yawsserpxE lartneC 22 15.1% 1.2% 1,163,911 16.4% 17.5% (235,574) 0 082,246 $ 31.23

026,704,32DBC sallaD 520,361004,162065,153%4.72%0.72595,513,6%3.2%6.4292 95,743 $ 27.40

0sallaD tsaE 028,49200%0.0%0.00%0.0%0.00 0 $ 43.56

586,304,73sallaD htroN raF 162 13.2% 1.9% 5,626,148 15.0% 15.4% 1,186,325 1,493,199 806,400133,779 $ 32.30

996,281,6DBC htroW troF 0984,082198,391%4.31%2.51688,049%0.0%2.5191 129,095 $ 30.74

748,740,02saniloC saL 004,140,2000,053583,251%2.31%3.41943,758,2%1.2%2.2128 (122,294) $ 30.22

207,980,01yaweerF JBL 33 20.1% 1.2% 2,143,485 21.2% 20.9% 100,950 0 0(34,620) $ 25.41

421,981notneD / ellivsiweL 783,8420)355,53(%0.0%5.12426,04%5.12%0.03 (40,624) $ 36.06

624,029,8seitiC-diM 000,002,20428,661%1.81%4.71626,255,1%2.0%2.7144 62,262 $ 26.14

117,567htroW troF htroN 000,002000,04345,24%8.42%2.32276,771%0.0%2.324 42,543 $ 16.66

129,954htroW troF tsaehtroN 00005,23%8.37%8.66531,703%0.0%8.663 32,500 $ 21.39

605,843,4retneC notserP 000,9110553,94%2.11%0.11857,874%9.0%1.0132 6,721 $ 43.01

North US 75 Corridor 14,272,429 000,513000,031298,261%5.32%0.42814,034,3%3.0%8.3286 22,805 $ 27.82

364,330,3htroW troF htuoS 00676,95%5.01%5.01978,813%3.1%2.902 419 $ 28.48

295,082sallaD tsewhtuoS 000%1.11%1.11140,13%0.0%1.112 0 $ 30.77

679,219,4yaweerF snommetS 0000,414150,473%1.91%9.71105,778%2.0%7.7131 397,143 $ 18.57

Uptown / Turtle Creek 10,233,626 292,871,1000,031)483,16(%7.01%4.21821,072,1%5.1%9.0164 (178,939) $ 42.29

251,056,151tekraM WFD latoT 573 16.7% 1.5% 27,532,156 18.2% 18.0% 2,528,365 3,099,088 7,566,324628,779 $ 29.71

Class B

815,846,4yawsserpxE lartneC 00204,63%2.9%3.8454,483%5.0%8.726 41,157 $ 26.08

405,459,5DBC sallaD 00)636,36(%5.61%2.71607,520,1%9.1%3.5153 (43,634) $ 20.99

652,223,3sallaD tsaE 00)267,33(%8.9%7.9390,323%2.0%5.9801 1,709 $ 17.56

283,210,91sallaD htroN raF 325 17.1% 1.3% 3,504,364 18.4% 17.0% (498,883) 35,963 13,216(257,436) $ 22.28

017,751,3DBC htroW troF 00)619,14(%2.21%0.11510,643%5.0%5.0193 38,747 $ 21.05

114,726,71saniloC saL 222 15.0% 3.9% 3,328,307 18.9% 15.5% (518,776) 11,413 144,500(602,189) $ 21.59

048,259,9yaweerF JBL 0008,61)705,63(%7.22%0.32919,582,2%2.0%7.22611 (15,798) $ 19.52

603,626,5notneD / ellivsiweL 090,440)590,46(%6.71%1.71834,069%0.0%1.71431 27,817 $ 20.72

175,503,51seitiC-diM 000,362004,03980,9%3.31%4.31209,840,2%4.0%0.31263 7,407 $ 19.73

404,708,2htroW troF htroN 000,880)139,02(%7.6%3.6429,671%0.0%3.614 11,345 $ 19.46

Northeast Fort Worth 3,112,006 00110,921%1.83%8.63782,441,1%0.0%8.6364 41,847 $ 21.15

996,159retneC notserP 00)680,12(%5.01%6.21133,021%5.0%1.2102 (20,519) $ 29.02

North US 75 Corridor 17,743,592 000,09000,84)309,25(%2.21%0.21285,321,2%0.1%0.11672 46,105 $ 19.82

990,542,5htroW troF htuoS 021,2010)100,19(%7.11%7.11414,216%0.1%7.01821 527 $ 22.88

040,392,2sallaD tsewhtuoS 0615,01663,14%1.9%2.01873,432%0.0%2.0155 (15,293) $ 17.92

778,996,6yaweerF snommetS 00)682,61(%0.92%2.92735,959,1%5.0%7.8238 (18,866) $ 16.62

Uptown / Turtle Creek 2,479,628 00825,31%3.71%4.61783,704%8.4%7.1164 20,640 $ 34.48

Total DFW Market 125,939,8432,098 15.4% 1.2% 20,986,038 16.7% 16.0% (1,226,870) 153,092 744,926(736,434) $ 21.06



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class C

229,627yawsserpxE lartneC 00100,61%2.2%8.0799,5%0.0%8.073 9,962 $ 21.12

383,048,2DBC sallaD 00806,23%1.9%2.8937,132%0.0%2.893 26,871 $ 18.33

046,714,2sallaD tsaE 00667,65%4.6%2.7846,471%0.0%2.739 (21,114) $ 15.01

478,758sallaD htroN raF 00257,31%9.21%2.21049,401%0.0%2.2104 5,492 $ 17.82

879,154DBC htroW troF 00)091,3(%4.2%1.3050,41%0.0%1.381 (3,240) $ 18.80

770,931,1saniloC saL 00)464,31(%3.5%7.7308,78%1.0%6.702 (27,326) $ 18.32

442,736yaweerF JBL 00165,01%3.4%1.4079,52%0.0%1.472 1,607 $ 12.94

792,219notneD / ellivsiweL 00856,7%4.3%8.3480,53%0.0%8.374 (4,444) $ 16.93

268,208,3seitiC-diM 00)220,33(%2.01%3.11762,034%0.0%3.11161 (43,775) $ 15.88

449,004htroW troF htroN 00)007,6(%7.3%9.2006,11%0.0%9.212 3,039 $ 19.17


861,682retneC notserP 000%0.1%0.1848,2%0.0%0.121 140 $ 24.86

North US 75 Corridor 2,070,343 00551,84%6.5%7.3014,67%0.0%7.367 40,008 $ 22.27

041,121,2htroW troF htuoS 00)772,41(%4.5%1.5932,701%0.0%1.5401 7,232 $ 20.03

875,558sallaD tsewhtuoS 00085,61%3.3%4.2643,02%0.0%4.234 8,150 $ 13.83

043,846,1yaweerF snommetS 00)885,42(%1.71%6.51481,752%0.0%6.5145 24,545 $ 14.02

Uptown / Turtle Creek 402,897 00226,2%4.9%1.9446,63%6.0%5.812 1,176 $ 33.04

114,241,22tekraM WFD latoT 00901,911%7.7%5.7724,766,1%0.0%5.7448 35,932 $ 18.49

All Classes

Central Expressway 12,477,265 00)171,381(%5.31%5.21263,455,1%9.0%6.11121 133,365 $ 29.51

705,202,23DBC sallaD 103 21.5% 2.1% 7,573,040 23.5% 23.8% 320,532 261,400 163,02578,980 $ 26.42

698,937,5sallaD tsaE 028,4920400,32%3.8%7.8147,794%1.0%6.8102 (19,405) $ 25.45

149,372,75sallaD htroN raF 616,918261,925,1491,107%9.51%1.61254,532,9%7.1%5.41725 (118,165) $ 28.40

783,297,9DBC htroW troF 0984,082522,041%5.21%3.31159,003,1%2.0%1.3167 164,602 $ 28.61

533,418,83saniloC saL 324 13.3% 2.8% 6,273,459 16.2% 14.0% (379,855) 361,413 2,185,900(751,809) $ 25.67

687,976,02yaweerF JBL 0008,61400,57%2.12%5.12473,554,4%7.0%9.02671 (48,811) $ 22.38

727,727,6notneD / ellivsiweL 774,2920)099,19(%1.51%4.51641,630,1%6.0%8.41481 (17,251) $ 22.69

958,820,82seitiC-diM 000,364,2004,03198,241%4.41%4.41597,130,4%3.0%1.41765 25,894 $ 21.66

950,479,3htroW troF htroN 000,882000,04219,41%7.9%2.9691,663%0.0%2.966 56,927 $ 18.27


373,685,5retneC notserP 000,9110962,82%5.01%8.01739,106%8.0%0.0155 (13,658) $ 40.69


207,993,01htroW troF htuoS 021,2010)206,54(%1.01%0.01235,830,1%9.0%1.9252 8,178 $ 23.65


391,162,31yaweerF snommetS 0000,414771,333%0.42%3.32222,490,3%3.0%0.32051 402,822 $ 17.32

Uptown / Turtle Creek 13,116,151 292,871,1000,031)432,54(%9.11%1.31951,417,1%1.2%0.11311 (157,123) $ 40.45

Total DFW Market 299,732,4063,515 15.5% 1.3% 50,185,621 16.7% 16.4% 1,420,604 3,252,180 8,311,250(71,723) $ 25.87

NOTE: Statistical set consists of office properties 10,000 SF and up, including owner-occupied properties; and excluding medical office and properties where the government is 100% owner and occupier. While CoStar attempts to provide the most accurate data at the end of every quarter, revisions are made throughout the year accounting for discrepancies in past reporting.


Q2 2018 Notable Office Lease TransactionsTENANT PROPERTY SUBMARKET SF LEASED BUILDING CLASS DEAL TYPE SIGN DATE

Dex Media, Inc* 2200 W Airfield Dr Mid-Cities 440,640 B Renewal Apr-18

Samsung 6625 Declaration Blvd North US 75 Corridor 216,000 A New Apr-18

Steward Health Care System 2375 N Glenville Dr North US 75 Corridor 165,300 A New Apr-18

7-Eleven 1601 LBJ Fwy LBJ Freeway 115,036 B New May-18

Darling Ingredients 5601 N MacArthur Blvd Las Colinas 96,809 B New May-18

GM Financial 220 E Las Colinas Blvd Las Colinas 69,549 A Renewal May-18

Chewy Inc 1950 N Stemmons Fwy Stemmons Freeway 51,934 A New May-18

Barrow, Hanley, Mewhinney & Strauss 2200 Ross Ave Dallas CBD 40,291 A Renewal Apr-18

Equinix 6160 Warren Pky Far North Dallas 37,284 A New Apr-18

Solis 15601 Dallas Pky Far North Dallas 30,913 A New May-18

Industrious 7250 N Dallas Pky Far North Dallas 28,040 A New Apr-18

Peloton 6600 Chase Oaks Blvd North US 75 Corridor 27,518 A New May-18

The CMI Group 1700 Pacific Ave Dallas CBD 27,445 A New May-18

Husch Blackwell* 1900 N Pearl St Dallas CBD 27,276 A New Jun-18

YPO 225 E John Carpenter Fwy Las Colinas 25,968 A New Apr-18

Leasing Activity Leasing Activity for Q2 2018 was approximately 4.7 million square feet, which is up 7.6% from the previous quarter. Far North Dallas saw the most leasing activity in Q2, as tenants followed population growth northward.

Q2 2018 Significant Sales Transactions – (50,000 SF or greater)PROPERTY SUBMARKET SALE DATE SALE PRICE SIZE (SF) PSF CLASS BUYER

Infomart Stemmons Freeway Apr-18 $800,000,000 1,600,000 $500 A Equinix, Inc

The Centrum & Hall Street at The Centrum Uptown/Turtle Creek Jun-18 $175,000,000 508,536 $344 A Oaktree Capital Management

International Plaza I & II Far North Dallas Apr-18 $115,000,000 756,000 $152 A Taconic Capital Advisors

3131 McKinney Uptown/Turtle Creek May-18 $48,269,715 145,610 $332 A TIAA-CREF

Former Brinker Headquarters LBJ Freeway Apr-18 $14,500,000 108,000 $134 B City of Dallas

Brookhollow Place Stemmons Freeway May-18 $7,000,000 135,876 $52 B Southwest Financial Credit Union

Sales Activity Office investment sales activity in Q2 2018 was the strongest in six quarters, with $1.5 billion in sales. The rolling four-quarter total was $3.8 billion, up 13% from the prior quarter’s rolling four-quarter total.

*Colliers Transaction


NORTH US-75 CORRIDOR 405K SF

UPTOWN/TURTLE CREEK 1.2M SF

LAS COLINAS 2.2M SF

FAR NORTH DALLAS 820K SF

TOTA

L: 8

.3M

SF

16.7% -71,723 SF VACANCY NET ABSORPTION

299.7M SFTOTAL OFFICEINVENTORY

Q2 2018 HIGHLIGHTS

CLASS A: 51% CLASS B: 42% CLASS C: 7%TOTAL INVENTORY BY CLASS -6.0%

ANNUALLY

CURR

ENT

MULTI-TENANT

OFFICEBUILDINGS BY SIZE

25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF

NUMBER OF BUILDINGSTOTAL SQUARE FEET

VACANCY

54519.4M SF

15.5%

42430.8M SF

21.6%

45570.4M SF

21.2%

14448.3M SF

22.2%

2919M SF20.4%

1520.7M SF

28.1%

151.7M SF125.9M SF

22.1M SF

UNDERCONSTRUCTION

SUBMARKET SF

MID-CITIES 2.5M SF

Quoted Gross Rental Rates for Existing Top Performing Office Buildings

BUILDING NAME ADDRESS SUBMARKET RBA YEAR BUILT

% LEASED

AVAILABLESPACE QUOTED RATE OWNER NAME

+E BUILDINGS

KPMG Plaza at Hall Arts 2323 Ross Ave Dallas CBD 459,383 2015 91% 68,330 $48.00 +E Hall Lone Star Associates LP

Frost Tower 640 Taylor St Fort Worth CBD 280,489 2018 68% 89,740 $40.00 +E Jetta Operating Company

Premier Place 5910 N Central Expressway Central Expressway 409,894 1985 88% 48,052 $37.00 +E CBRE Global Investors

Chase Tower 2200 Ross Ave Dallas CBD 1,274,448 1987 80% 262,611 $36.00 +E Fortis Property Group, LLC

Legacy Town Center HQ I 7800 N Dallas Pky Far North Dallas 157,800 2013 95% 9,756 $36.50 +E Randy Heady & Company Realtors

8300 Douglas 8300 Douglas Ave Preston Center 100,893 1982 82% 18,722 $36.50 +E PegasusAblon

NNN BUILDINGS

2100 McKinney 2100 McKinney Ave Uptown/Turtle Creek 360,859 1999 97% 39,735 $39.33 NNN NY State Common Retirement Fund

The Star 1 Cowboys Way Far North Dallas 397,819 2016 89% 43,685 $39.50 NNN City of Frisco

17Seventeen McKinney 1717 McKinney Ave Uptown/Turtle Creek 369,017 2010 99% 10,496 $39.00 NNN Gaedeke Group

2000 McKinney 2000 McKinney Ave Uptown/Turtle Creek 447,595 2008 99% 43,161 $39.00 NNN Union Investment Real Estate GmbH

Saint Ann Court 2501 N Harwood St Uptown/Turtle Creek 314,361 2009 100% 40,912 $38.00 NNN Harwood International

Harwood No. 7 Frost Tower 2950 N Harwood St Uptown/Turtle Creek 167,735 2015 97% 14,275 $38.00 NNN Harwood International

McKinney & Olive 2021 McKinney Ave Uptown/Turtle Creek 536,000 2016 92% 43,971 $38.00 NNN Crescent Real Estate Equities LLC

8 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International

Copyright © 2015 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Colliers International | Market000 Address, Suite # 000 Address, Suite #+1 000 000 0000colliers.com/<<market>>


Copyright © 2018 Colliers International.The information contained herein has been obtained from CoStar, Real Capital Analytics, and other primary and secondary sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Colliers International1717 McKinney Avenue, Suite 900 Dallas, Texas 75202+1 214 692 1100colliers.com/dallasfortworth

RESEARCHERS:

MIKE OTILLIODirector of ResearchDIRECT +1 214 217 [email protected]

KARI BEETSBusiness Development and Content StrategistDIRECT +1 214 217 [email protected]

77

20

30

30

308080

820

820

820

DNT

DNT

LLT

LLT

45

45

75

75

1709

12

12

12

12

12

12

12

635

635

408

161

161

161

114

121

121

121

121

1212499

303

352

190

190

190

78

78

66

205

183

183

183

183

67

67

67

360

377

377

377

380

380

380

199

287

287

287B

287B

35

35E

35W

35E

35W

35E

35W

35E35W

30

30

35W

67

67

377

288

114

20

20635

20

20

20

287

81

175

26

20820

20

175

30

DNT

DNT

380

114

183

DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE

WEST LAKE / GRAPEVINE

HURST / EULESS /BEDFORD

ARLINGTONGRAND PRAIRIE

SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS

MESQUITEFORNEYTERRELL

WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY

OFFICE CTRWEST LBJ EXT

WEST LBJ

URBAN CENTER

WINGREN

DFW / FREEPORTCOPPELL

NORTHWEST FORT WORTH

SOUTHWEST FORT WORTH

SOUTHEAST FORT WORTH

NORTHEASTFORT WORTH

STEMMONSFREEWAY

ALLIANCE / FOSSIL CREEK

360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10

OFFICE SUBMARKET MAP

1 1012.6m SF 13.9% Vac UC = None $ 28.96 PSF 3.8m SF 11.6% Vac UC = 288K SF $ 19.32 PSF

2 1132.4m SF 23.7% Vac UC = 163K SF $ 26.63 PSF 4.1m SF 40.8% Vac UC = None $ 20.98 PSF

3 125.6m SF 8.6% Vac UC = 294.8K SF $ 25.35 PSF 5.6m SF 10.5% Vac UC = 119K SF $ 40.80 PSF

4 1357.4m SF 15.8% Vac UC = 832K SF $ 28.12 PSF 34m SF 16.7% Vac UC = 604K SF $ 24.61 PSF

5 149.4m SF 12.5% Vac UC = 280.5K SF $ 26.38 PSF 10.3m SF 9.6% Vac UC = 102.9K SF $ 23.75 PSF

6 1538.6m SF 13.7% Vac UC = 1,870K SF $ 25.42 PSF 3.4m SF 8.2% Vac UC = 10.5K SF $ 18.38 PSF


8 177.6m SF 14.2% Vac UC = 37.7K SF $ 21.71 PSF 13.1m SF 11.9% Vac UC = 1,175K SF $ 39.77 PSF

927.9m SF 15% Vac UC = 2493.4K SF $ 21.73 PSF 299.8m SF 16.6% Vac UC = 8,685K SF $ 25.61 PSF

UC = Under Construction

Total Market

121 Bldgs

103 Bldgs

197 Bldgs

526 Bldgs

74 Bldgs

320 Bldgs

180 Bldgs

186 Bldgs

63 Bldgs

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth

Northeast Fort Worth

Preston Center

North US 75 Corridor

South Fort Worth

Southwest Dallas

79 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

Stemmons Freeway

Uptown / Turtle Creek

564 Bldgs

54 Bldgs

420 Bldgs

252 Bldgs

98 Bldgs

147 Bldgs

113 Bldgs

3,497 Bldgs

Office demand slower, but still steady



Mike Otillio Director of ResearchKari Beets Senior Research Associate

After the boom-year of 2017, 2018 is setting up to be a soft landing for the DFW office market. Q1 started off strong, absorbing a total of 1.5 million square feet, with Liberty Mutual’s 1.1 million square foot build-to-suit campus accounting for 73% of this total. Multi-tenant activity rebounded after being negative 3 of 4 quarters in 2017, with move-ins totaling about half a million square feet.

While activity may be slower in 2018 than in previous years, there are few signs that this is anything other than a breather. Job growth has slowed, but unemployment is so low in the metroplex, arguably under the natural rate of unemployment, that employers must compete to fill needed positions making it harder to add new jobs.

One potential sign of softening is the increase of sublease space on the market in the last few quarters. Sublease net absorption was more than 300,000 square feet in Q4 2017 and again in Q1 2018, placing the total of sublet space in DFW at 3.5 million square feet. Central Expressway and the Dallas CBD have the highest percentage of sublet to vacant space with over 2% vacant.

A Look Ahead> Office sales activity will continue to be slow over the next

few quarters as pricing expectations reset. Average sales prices per square foot have risen from the low $100s in 2014 to low $200s in 2017 and Q1 2018, raising the pricing expectations of sellers. Buyers are wary they will be able to achieve expected returns with such high prices, especially if a downturn occurs.

> Vacancy will hold steady over the next few quarters as the construction pipeline is well-leased.

> Rental rates will continue to flatten. Some submarkets that have seen large jumps over the past few years may see decreases in overall rental rates. Far North Dallas, LBJ Freeway, and Central Expressway with its large vacancies, are at the highest risk of decreases in overall asking rates.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 16.6% 17.9% 16.6%

Change from prior Quarter 0.1% -0.1% 0.5%

Absorption (Thousand Square Feet) 1,498 1,927 -532

New Supply (Thousand Square Feet) 2,204 2,135 70







AnnualChange

Quarterly Change

Quarterly Forecast*

Vacancy

Net Absorption

Under Construction

Rental Rate

*Projected


Market Highlights> DFW added 96,000 jobs, an increase of 2.7% from February 2017 to February 2018,

while Texas grew at a rate of 2.4% and the U.S. grew at 1.6% over the same period. The job growth rate slowed over the past two years from 3.1% from 2016-2017 to 2.7% from 2017-2018.

> Tenants continue to demand new product. The percentage of available space under construction in Q1 was 28%, a drop from 38% available at the end of Q4.

Vacancy Rate

Vacancy was relatively flat from the previous quarter, decreasing just 0.1% to 16.5% in Q1 2018. Year-over-year vacancy is up just 0.4%, showing the market has reached a steady balance. Class A vacancy decreased 0.1% from prior quarter to 17.9% in Q1 2018. Class B vacancy increased half a percentage point from the previous quarter to 16.6% as the flight to quality continued.

Central Expressway saw the greatest increase in vacancy, rising 2.6% from year-end 2017 to 13.9%. This is due to an increase in sublease space from Sunoco putting its 120,000 square foot space in the Offices at Park Lane on the market and Davaco subleasing 35,000 square feet in Three Energy Square. LBJ Freeway saw the greatest year-over-year improvement in Class A with an overall vacancy rate dropping 1.5% to 22.4%, However, it is still the fourth highest vacancy rate of any submarket.

Absorption & DemandQ1 2018 posted 1.5 million square feet of net absorption, about equal to the market activity in Q4 2017. For the second quarter in a row, the DFW market showed more than 350,000 square feet of sublease space returning to the market. Vacant sublease space was 3.5 million square feet at the end of Q1, with Class A sublet space totaling 2.3 million square feet, or 9.2% of available Class A space.

Because of Liberty Mutual’s move to their new campus, Far North Dallas led the metro for absorption with 828,000 square feet. While all but two markets posted positive Class A net absorption, only four markets had positive Class B net absorption in Q1.

Rental RatesRental rates increased slightly from the prior quarter to $25.61, and increase of 5.8% from the year prior. Rent growth slowed through 2017 and the trend continues in 2018. Class A rates increased even slower than overall rates, rising $0.15 over the prior quarter to $29.40, which was up 4.8% from the same time last year. After topping $40 last quarter, Preston Center’s overall rate continued to increase, up 1.4% to $40.80.

For Class A, Central Expressway showed the highest increase in rates, despite vacancies growing this quarter. Overall, Class B increased 1.5% from prior quarter to $21.15, but five submarkets posted declines in average rental rates. The gap between Class A and Class B rates for the overall office market was $8.25, with Uptown-Turtle Creek showing a tighter spread of $6.14.

0%

5%

10%

15%

20%

-2,500

0

2,500

5,000

7,500

10,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Thou

sand

s of

Squ

are

Feet

Vaca

ncy

Rate



DFW 4.3% 3.7%

Texas 4.8% 4.1%

U.S. 4.9% 4.4%


# of Jobs Added

DFW 2.8% 96.0k

Texas 2.4% 288.6k

U.S. 1.6% 2,244k



-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

2014 2015 2016 2017 2018

Thou

sand

s of

Squ

are

Feet



$15

$19

$23

$27

$31

$35

10%

12%

14%

16%

18%

20%

2010 2012 2014 2016 2018

Rent

al R

ate

(Gro

ss)

Vaca

ncy

Rate




EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT



417,028,9921Q 8102 3,497 15.5% 1.2% 49,763,515 16.6% 16.5% 1,497,955 2,204,233 8,684,5011,497,955 $ 25.61

184,616,7924Q 7102 3,488 15.5% 1.0% 49,057,237 16.5% 16.3% 4,612,358 7,776,816 10,045,8981,561,962 $ 25.37

722,102,5923Q 7102 3,470 15.5% 0.9% 48,203,945 16.3% 16.2% 3,050,396 5,361,562 11,840,437449,532 $ 25.35

304,171,4922Q 7102 3,455 15.4% 0.8% 47,623,653 16.2% 16.1% 2,600,864 4,331,738 8,968,3982,014,119 $ 24.96

689,615,1921Q 7102 3,438 15.4% 0.7% 47,032,587 16.1% 15.8% 586,745 1,690,521 10,969,868586,745 $ 24.65

503,178,6821Q 6102 025,675,9871,497,1571,53%3.51%8.51316,733,54%6.0%2.51293,3 35,175 $ 23.63

862,430,1821Q 5102 3,349 14.7% 0.8% 43,606,940 15.5% 15.3% 1,601,875 2,545,784 6,068,3511,601,875 $ 21.90

216,111,6721Q 4102 3,303 15.3% 0.7% 44,349,786 16.1% 16.6% 1,914,528 526,187 6,531,5151,914,528 $ 20.88

439,551,4721Q 3102 3,280 16.2% 0.7% 46,361,022 16.9% 16.9% 326,989 391,806 2,365,631326,989 $ 19.59

Class A

23,655,61829 24.7% 2.5% 6,426,958 27.2% 27.4% 245,817 261,400 163,025245,817 $27.72Dallas CBD

5,829,52017 12.8% 0.0% 747,445 12.8% 13.6% 48,158 0 280,48948,158 $29.08Fort Worth CBD

117,213,077495 14.8% 1.4% 18,984,080 16.2% 16.2% 1,573,360 1,873,199 7,179,2341,573,360 $30.16Dallas Suburban

4,175,09525 18.4% 1.0% 806,648 19.3% 20.7% 59,257 0 200,00059,257 $22.77Fort Worth Suburban

150,873,310566 16.4% 1.5% 26,965,131 17.9% 18.0% 1,926,592 2,134,599 7,822,7481,926,592 $29.40Total DFW Market

Class B

5,833,94034 15.6% 1.2% 982,072 16.8% 16.5% (20,002) 0 0(20,002) $20.76Dallas CBD

3,025,77139 13.7% 0.4% 426,809 14.1% 11.7% (72,585) 0 0(72,585) $20.86Fort Worth CBD

106,964,3391,802 15.6% 0.9% 17,512,311 16.4% 15.9% (402,717) 69,634 670,833(402,717) $21.13Dallas Suburban

11,066,079213 18.7% 0.9% 2,154,337 19.5% 19.1% (36,282) 0 190,920(36,282) $21.68Fort Worth Suburban

126,890,1292,088 15.8% 0.9% 21,075,529 16.6% 16.1% (531,586) 69,634 861,753(531,586) $21.15Total DFW Market


564,33218 0.5% 0.0% 2,926 0.5% 0.5% 50 0 050 $20.08Fort Worth CBD

15,559,095629 8.3% 0.1% 1,304,025 8.4% 9.1% 114,789 0 0114,789 $18.41Dallas Suburban

3,013,465155 5.2% 0.0% 157,294 5.2% 4.6% (17,627) 0 0(17,627) $18.66Fort Worth Suburban

22,047,275842 7.8% 0.1% 1,722,855 7.8% 8.3% 102,949 0 0102,949 $18.36Total DFW Market


9,419,62374 12.4% 0.1% 1,177,180 12.5% 12.2% (24,377) 0 280,489(24,377) $26.38Fort Worth CBD

239,736,5112,926 14.7% 1.1% 37,800,416 15.8% 15.6% 1,285,432 1,942,833 7,850,0671,285,432 $25.64Dallas Suburban

18,264,639394 16.4% 0.8% 3,118,279 17.1% 17.1% 5,348 0 390,9205,348 $21.75Fort Worth Suburban

299,820,7143,497 15.5% 1.2% 49,763,515 16.6% 16.5% 1,497,955 2,204,233 8,684,5011,497,955 $25.61Total DFW Market



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A

528,101,7yawsserpxE lartneC 22 14.6% 3.0% 1,246,157 17.5% 13.1% (317,820) 0 0(317,820) $ 30.55

816,556,32DBC sallaD 520,361004,162718,542%4.72%2.72859,624,6%5.2%7.4292 245,817 $ 27.72

0sallaD tsaE 028,49200%0.0%0.00%0.0%0.00 0 $ 43.56

415,923,73sallaD htroN raF 161 13.4% 1.8% 5,691,625 15.2% 14.6% 1,049,022 1,493,199 806,4001,049,022 $ 32.18

025,928,5DBC htroW troF 984,0820851,84%6.31%8.21544,747%0.0%8.2171 48,158 $ 29.08

837,407,91saniloC saL 80 10.7% 1.8% 2,469,034 12.5% 13.3% 364,296 250,000 1,725,000364,296 $ 30.26

943,554,01yaweerF JBL 00075,531%5.12%2.02190,611,2%2.1%0.9143 135,570 $ 25.64

421,981notneD / ellivsiweL 00170,5%7.2%0.00%0.0%0.03 5,071 $ 19.02

749,469,8seitiC-diM 000,002,20165,401%3.91%1.81370,526,1%3.0%8.7154 104,561 $ 25.54

117,527htroW troF htroN 000,00200%8.42%8.42512,081%0.0%8.423 0 $ 18.64

129,514htroW troF tsaehtroN 000%8.37%8.37531,703%0.0%8.372 0 $ 21.39

605,643,4retneC notserP 000,9110436,24%2.21%2.11974,584%9.0%2.0132 42,634 $ 42.69

North US 75 Corridor 14,129,429 000,5440365,59%5.42%8.32747,763,3%3.0%5.3276 95,563 $ 28.05

364,330,3htroW troF htuoS 00752,95%5.21%5.01892,913%3.1%2.902 59,257 $ 28.20


582,284,4yaweerF snommetS 000,4140)290,32(%7.81%2.91446,068%1.0%1.9121 (23,092) $ 18.49

Uptown / Turtle Creek 10,228,768 410,571,1000,031555,711%7.01%7.01981,190,1%2.1%5.964 117,555 $ 41.28

013,378,051tekraM WFD latoT 566 16.4% 1.5% 26,965,131 17.9% 18.0% 1,926,592 2,134,599 7,822,7481,926,592 $ 29.40

Class B

611,427,4yawsserpxE lartneC 00)557,4(%0.01%1.01393,774%8.0%3.926 (4,755) $ 25.68

049,338,5DBC sallaD 34 15.6% 1.2% 982,072 16.8% 16.5% (20,002) 0 0(20,002) $ 20.76

404,952,3sallaD tsaE 00)174,53(%9.8%0.01035,623%4.0%7.9801 (35,471) $ 17.19

582,491,91sallaD htroN raF 325 16.1% 1.0% 3,286,098 17.1% 15.9% (228,975) 10,221 25,742(228,975) $ 22.52

177,520,3DBC htroW troF 00)585,27(%7.11%1.41908,624%4.0%7.3193 (72,585) $ 20.86

909,748,71saniloC saL 005,441314,11382,28%9.51%5.51767,277,2%7.1%6.41122 82,283 $ 21.29

009,041,01yaweerF JBL 00)601,83(%1.52%5.52578,685,2%6.0%9.42711 (38,106) $ 19.32


805,691,51seitiC-diM 004,3920)464,111(%7.31%4.41681,881,2%5.0%0.41953 (111,464) $ 20.05

254,096,2htroW troF htroN 000,880)854,42(%3.8%2.9103,842%0.0%8.993 (24,458) $ 19.88


253,049retneC notserP 00)765(%5.01%6.01213,99%0.0%6.0191 (567) $ 29.33

North US 75 Corridor 17,737,383 000,951000,84)836,26(%6.11%2.21101,861,2%0.1%3.11372 (62,638) $ 20.20

951,122,5htroW troF htuoS 029,2010)889,89(%3.9%1.11731,285%2.1%9.9721 (98,988) $ 23.10

425,662,2sallaD tsewhtuoS 615,010956,45%5.11%1.9965,602%0.0%1.935 54,659 $ 18.26

649,186,6yaweerF snommetS 00085,2%0.92%9.82129,239,1%3.0%6.8238 2,580 $ 16.57

Uptown / Turtle Creek 2,478,336 00)211,7(%0.71%3.71720,824%9.4%4.2164 (7,112) $ 35.14

921,098,621tekraM WFD latoT 2,088 15.8% 0.9% 21,075,529 16.6% 16.1% (531,586) 69,634 861,753(531,586) $ 21.15



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class C


383,019,2DBC sallaD 00737,5%1.9%9.8016,852%0.0%9.804 5,737 $ 17.04

412,053,2sallaD tsaE 00088,77%8.9%5.6435,351%2.0%3.698 77,880 $ 14.30

204,858sallaD htroN raF 00062,8%8.31%9.21234,011%4.0%5.2104 8,260 $ 18.01

233,465DBC htroW troF 0005%5.0%5.0629,2%0.0%5.081 50 $ 20.08

770,980,1saniloC saL 00268,31%8.6%6.5774,06%1.0%4.591 13,862 $ 18.29

392,776yaweerF JBL 00459,8%0.11%7.9675,56%0.0%7.992 8,954 $ 17.69

027,398notneD / ellivsiweL 00207,11%1.5%8.3042,43%0.0%8.374 11,702 $ 16.80

985,737,3seitiC-diM 00402,13%9.01%1.01700,773%0.0%1.01061 31,204 $ 16.42

449,004htroW troF htroN 00)937,9(%2.1%7.3936,41%0.0%7.312 (9,739) $ 19.00


861,682retneC notserP 00)041(%0.1%0.1889,2%0.0%0.121 (140) $ 24.77


568,750,2htroW troF htuoS 00)629,9(%9.3%4.4883,09%0.0%4.4401 (9,926) $ 19.56

825,948sallaD tsewhtuoS 00)247,4(%2.4%8.4867,04%0.0%8.434 (4,742) $ 13.39

623,006,1yaweerF snommetS 00)331,94(%0.51%1.81974,982%0.0%1.8125 (49,133) $ 15.21


572,740,22tekraM WFD latoT 00949,201%3.8%8.7558,227,1%1.0%8.7248 102,949 $ 18.36

All Classes

Central Expressway 12,552,863121 11.9% 2.0% 1,739,509 13.9% 11.3% (316,536) 0 0(316,536) $ 28.96

149,993,23DBC sallaD 520,361004,162255,132%8.32%7.32046,766,7%1.2%6.12301 231,552 $ 26.63

816,906,5sallaD tsaE 028,4920904,24%3.9%6.8460,084%3.0%3.8791 42,409 $ 25.35

102,283,75sallaD htroN raF 526 14.3% 1.5% 9,088,155 15.8% 15.1% 828,307 1,503,420 832,142828,307 $ 28.12

326,914,9DBC htroW troF 984,0820)773,42(%2.21%5.21081,771,1%1.0%4.2147 (24,377) $ 26.38

427,146,83saniloC saL 005,968,1314,162144,064%3.41%7.31872,203,5%7.1%4.21023 460,441 $ 25.42

245,372,12yaweerF JBL 00814,601%9.22%4.22245,867,4%9.0%5.12081 106,418 $ 22.52


440,998,72seitiC-diM 004,394,20103,42%1.51%0.51662,091,4%4.0%7.41465 24,301 $ 21.73

701,718,3htroW troF htroN 000,8820)791,43(%7.01%6.11551,344%0.0%0.2136 (34,197) $ 19.32


620,375,5retneC notserP 000,9110729,14%3.11%5.01977,785%7.0%8.945 41,927 $ 40.80


784,223,01htroW troF htuoS 029,2010)756,94(%1.9%6.9328,199%0.1%6.8252 (49,657) $ 23.75


Stemmons Freeway 12,764,557 000,4140)540,07(%6.32%1.42446,770,3%2.0%9.32741 (70,045) $ 17.37


Total DFW Market 299,820,7143,497 15.5% 1.2% 49,763,515 16.6% 16.5% 1,497,955 2,204,233 8,684,5011,497,955 $ 25.61




Thompson & Knight LLP 1722 Routh St Dallas CBD 154,022 A Renewal Feb-18

GuideStone Financial Resources 5005 Lyndon B Johnson Fwy

East LBJ Freeway 112,825 A New Jan-18

American Airlines FAA Blvd HEB/Mid-Cities 80,000 B New Feb-18

Steward Health Care System LLC 1900 N Pearl St Dallas CBD 66,828 A New Feb-18

Elevate Credit 5080 Spectrum Dr Quorum/Bent Tree 52,000 A New Feb-18

Balfour Beatty Construction 3100 McKinnon St Uptown/Turtle Creek 46,694 A Renewal Mar-18

HBK Capital 2300 N Field St Uptown/Turtle Creek 43,482 A New Feb-18

Bell Nunnally & Martin, LLP 2323 Ross Ave Dallas CBD 42,000 A New Mar-18

Simon Greenstone Panatier, PC 1201 Main St Dallas CBD 30,692 A New Mar-18

Medallion Midstream LLC 909 Lake Carolyn Pky Urban Center/Wingren 28,058 A New Jan-18

Barnes & Thornburg 2121 Pearl St Uptown/Turtle Creek 28,015 A New Mar-18

Social Security Administration 1999 Bryan St Dallas CBD 25,297 A New Jan-18

Bank of Texas 777 Main St Ft Worth CBD 23,111 A New Feb-18

T-Force 14881 Quorum Dr Quorum/Bent Tree 16,863 B New Feb-18

Teaching Trust 1349 Empire Central Dr Stemmons Freeway 15,431 B New Mar-18

Leasing Activity Leasing Activity for Q1 2018 was approximately 4 million square feet, which is down 28% from Q1 of the prior year. Far North Dallas saw the greatest leasing activity, followed by the North US 75 Corridor.


Former Brinker Headquarters LBJ Freeway Apr-18 $14,500,000 108,000 $134 B City of Dallas

Northwood Tower at Midtown Far North Dallas Mar-18 $9,369,000 161,630 $58 B RTG Capital

International Plaza I & II Far North Dallas Apr-18 $115,000,000 756,000 $152 A Taconic Capital Advisors

Infomart Stemmons Freeway Apr-18 $800,000,000 1,600,000 $500 A Equinix, Inc

Preston Park Far North Dallas Mar-18 $24,049,839 198,759 $121 B Libitzky Property Companies

Centreport Mid-Cities Feb-18 $12,700,000 133,246 $95 B Lincoln Property Company

Turtle Creek Tower Uptown/Turtle Creek Feb-18 $49,000,000 142,974 $343 A STRS Ohio

Sales Activity Investment sales slowed significantly in Q1 2018, dropping from $816 million in Q4 2017 to $287 million. This follows the trend for the overall US office market, which declined 23% from the previous quarter, but DFW shows a starker drop-off of 65%.




LAS COLINAS 1.9M SF

FAR NORTH DALLAS 830K SF

TOTA

L: 8

.7M

SF

16.6% 1,497,955 SFVACANCY NET ABSORPTION


Q1 2018 HIGHLIGHTS

CLASS A: 50% CLASS B: 42% CLASS C: 7%TOTAL INVENTORY BY CLASS -20.8%

ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

52318.7M SF

15.4%

42430.8M SF

21.5%

45570.4M SF

20.7%

13746M SF23.0%

2918.9M SF

20.7%

1622M SF27.7%

150.9M SF126.9M SF

22.0M SF

UNDERCONSTRUCTION

SUBMARKET SF

MID-CITIES 2.5M SF



% LEASED


+E BUILDINGS

KPMG Plaza at Hall Arts 2323 Ross Ave Dallas CBD 459,383 2015 91% 68,330 $48.00 +E Hall Lone Star Associates Lp

1919 McKinney 1919 McKinney Ave Uptown/Turtle Creek 118,940 1924 54% 64,877 $38.00 +E Ecom Real Estate Mgmt, Inc.

Tollway Center 14675 Dallas Pky Far North Dallas 197,740 2016 91% 18,064 $36.00 +E Cawley Management, LLC


Frisco Bridges Place 2600 N Dallas Pky Far North Dallas 170,000 2016 89% 18,500 $34.50 +E Randy Heady & Company Realtors

Tower at Frisco Square 5757 Main St Far North Dallas 166,305 2015 86% 35,136 $34.50 +E Encore Office

NNN BUILDINGS

The Star 1 Cowboys Way Far North Dallas 397,819 2016 89% 43,685 $39.50 NNN NY State Common Retirement Fund

2100 McKinney 2100 McKinney Ave Uptown/Turtle Creek 360,859 1999 97% 39,735 $39.33 NNN City of Frisco


Rosewood Court 2101 Cedar Springs Rd Uptown/Turtle Creek 405,291 2008 98% 43,223 $37.50 NNN 1900 Pearl Street JV, LLC

The Terraces at Douglas Center 5960 Berkshire Ln Preston Center 171,583 2017 50% 85,424 $37.50 NNN Lionstone Investments

The Crescent Building 200 200 Crescent Ct Uptown/Turtle Creek 390,305 1985 100% 54,836 $37.00 NNN Harwood International







RESEARCHERS:


KARI BEETSSenior Research AssociateDIRECT +1 214 217 [email protected]

77

20

30

30

308080

820

820

820

DNT

DNT

LLT

LLT

45

45

75

75

1709

12

12

12

12

12

12

12

635

635

408

161

161

161

114

121

121

121

121

1212499

303

352

190

190

190

78

78

66

205

183

183

183

183

67

67

67

360

377

377

377

380

380

380

199

287

287

287B

287B

35

35E

35W

35E

35W

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35E35W

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35W

67

67

377

288

114

20

20635

20

20

20

287

81

175

26

20820

20

175

30

DNT

DNT

380

114

183

DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTER

WINGREN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10





4 1357.4m SF 15.8% Vac UC = 832K SF $ 28.12 PSF 34m SF 16.7% Vac UC = 604K SF $ 24.61 PSF


6 1538.6m SF 13.7% Vac UC = 1,870K SF $ 25.42 PSF 3.4m SF 8.2% Vac UC = 10.5K SF $ 18.38 PSF





Total Market

121 Bldgs

103 Bldgs

197 Bldgs

526 Bldgs

74 Bldgs

320 Bldgs

180 Bldgs

186 Bldgs

63 Bldgs

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

79 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

Stemmons Freeway


564 Bldgs

54 Bldgs

420 Bldgs

252 Bldgs

98 Bldgs

147 Bldgs

113 Bldgs

3,497 Bldgs

2017: The Year of the Move-In



Mike Otillio Director of ResearchKari Beets Research Associate

After years of speculation, planning, and construction, the relocations and consolidations that have been the hype of the DFW market for the last several years have come to fruition. Toyota moved into its 2.1 million square foot headquarters in June 2017, JP Morgan occupied its 1 million square foot campus in Q4, and TD Ameritrade moved to its Westlake campus in December. Absorption in 2017 was driven by single-tenant build-to-suit projects. Of the 5.6 million in net absorption for the year, 3.6 million, or two-thirds was from single-tenant buildings.

Much of the activity in the market was large tenants moving into higher-grade space. While 2017 was a strong year for Class A — with 6.7 million square feet of net absorption, the third highest year since 1982 — Class B posted negative net absorption of 835,000 square feet. One example of this is JP Morgan who consolidated offices, including its Class B Lake Vista location to their Class A build-to-suit in Legacy West. Even though over 75% of Class A absorption was single-tenant, Class A still saw positive absorption of 1.8 million in multi-tenant product verses 51,000 square feet of Class B multi-tenant absorption.

A Look Ahead> With no negative catalyst in sight and favorable results from

tax reform for real estate and median-priced markets like DFW, we foresee another good 2-3 years in this cycle. Due to fewer build-to-suits in the pipeline, net absorption will drop off dramatically in 2018, but we will still see slow but steady rent growth and rising occupancy in the hot markets — Far North Dallas, Uptown, and a push toward Las Colinas. We may be in the ninth inning, but this expansion is heading into extra innings.

> DFW can expect more corporate relocations, as the tax reform is likely to make companies from coastal markets consider lower priced housing markets to attract and retain employees while keeping salary costs lower.

> The tightening labor market is pushing more companies to think about real estate as a recruiting tool, causing more migration to higher-grade amenity-rich space.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 15.8% 17% 15.5%


Absorption (Thousand Square Feet) 1,379 2,488 -1,073








AnnualChange

Quarterly Change

Quarterly Forecast*

Vacancy

Net Absorption

Under Construction

Rental Rate

*Projected


Market Highlights> Job growth slowed slightly toward the end of 2017. From November 2016 to November

2017, DFW added 100,400 jobs, compared with 135,100 from the year prior to January 2017. Dallas has added jobs at an annual rate of 2.9%, versus 2.7% for Fort Worth. The unemployment rate for November stood at 3.2%, half a percent below the Texas unemployment rate of 3.7%. Professional and Business Services grew 5.2% in the year prior to November 2017.

> Over 8.6 million square feet was delivered in 2017, the most of any year during this cycle. In Q4, 2.5 million square feet delivered, of which 67% was built-to-suit, including the 1 million square foot JP Morgan campus. The construction pipeline is down considerably by 31% from the end of 2016, with 64 properties totaling 8.9 million square feet under construction. The construction pipeline is two-thirds leased.

Vacancy Rate

Overall vacancy increased from 15.5% in Q3 2017 to 15.8% in Q4 2017, an increase of 1.2 million square feet. Vacancy is up 0.5% from the end of 2016. Class A vacancy decreased 0.4% to 17%, and Class B vacancy increased 0.9% from prior quarter to 15.5%.

Thirteen out of seventeen submarkets saw flat to increasing vacancy in Q4. The North US 75 corridor saw the greatest improvement in vacancy, decreasing from 18.3% in Q3 to 17.6% in Q4. Lewisville-Denton’s vacancy rate rose 5.8% after several large move-outs.

Rental RatesOverall gross rental rates climbed slower in Q4 2017 compared to earlier in the year, increasing only 0.2% to $25.38. Class A rates were virtually flat at $29.29, showing that while the flight to quality increases, supply and demand are more in balance and tenants are reaching the limits of what they are willing to pay. Class B rates increased 0.9% to $21.38.

Preston Center had the highest advertised rates for Class A space in Q4 2017 at $42.21, just ahead of Uptown / Turtle Creek at $40.78. Uptown’s rates were flat quarter-to-quarter and up only 0.7% from the prior year, showing that rates have flattened as predicted. Rates in Preston Center still show growth, as they are up 1.7% from the previous quarter. Central Expressway showed a 7.2% decrease in rates from Q3, but its rate of $27.77 is still up 3.5% from the end of 2016.

Absorption & Demand Quarterly net absorption was a strong 1.4 million square feet, bringing the 2017 total net absorption to 5.6 million square feet. Class B, however, posted negative absorption of 1.1 million square feet, and Class A saw negative 276,528 square feet of sublet absorption. While significantly stronger than 2016, net absorption was 6.6 million square feet less than in 2014 and 2015.

With move-ins from JP Morgan and Fannie Mae, Far North Dallas saw 1.3 million square feet of absorption in Q4 alone, bringing its yearly total to 4.3 million square feet. However, Lewisville-Denton experienced negative 570,000 square feet of absorption from Xerox vacating 256,000 SF at 1303 Ridgeview and JP Morgan moving out of Lake Vista, however this space will be filled by NationStar Mortgage in July 2018.

0%

5%

10%

15%

20%

0

2,500

5,000

7,500

10,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Thou

sand

s of

Squ

are

Feet

Vaca

ncy

Rate



DFW 3.7% 3.2%

Texas 4.5% 3.7%

U.S. 4.4% 3.9%


# of Jobs Added

DFW 2.8% 100.4k

Texas 2.7% 331.6k

U.S. 1.5% 2,133k



-500

500

1,500

2,500

3,500

4,500

5,500

6,500

7,500

2013 2014 2015 2016 2017

Thou

sand

s of

Squ

are

Feet



$15

$19

$23

$27

$31

$35

10%

12%

14%

16%

18%

20%

2009 2011 2013 2015 2017

Rent

al R

ate

(Gro

ss)

Vaca

ncy

Rate




EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT



558,464,0334Q 7102 4,487 14.8% 1.0% 52,101,927 15.8% 15.5% 5,623,562 8,638,656 8,865,7391,379,184 $ 25.38

976,529,7233Q 7102 4,463 14.7% 0.9% 50,941,935 15.5% 15.5% 4,244,378 6,099,480 10,751,389973,179 $ 25.32

266,317,6232Q 7102 4,440 14.7% 0.8% 50,703,097 15.5% 15.4% 3,271,199 4,887,463 9,983,3801,979,164 $ 24.95

382,610,4231Q 7102 4,417 14.7% 0.8% 50,034,114 15.4% 15.3% 1,292,035 2,203,284 11,750,1891,292,035 $ 24.62

999,218,1234Q 6102 4,397 14.6% 0.7% 49,122,865 15.3% 15.2% 3,097,531 5,239,706 12,866,737454,524 $ 24.22

392,375,6134Q 5102 4,317 14.3% 0.5% 46,980,690 14.8% 14.9% 6,631,163 7,400,731 9,639,7601,284,603 $ 23.20

265,271,9034Q 4102 4,247 14.2% 0.7% 46,211,122 14.9% 15.2% 6,697,937 3,878,826 8,483,2191,540,189 $ 21.82

637,392,5034Q 3102 4,181 15.5% 0.6% 49,030,233 16.1% 16.1% 3,256,666 2,481,549 6,979,395751,706 $ 20.46

250,986,2034Q 2102 4,140 15.9% 0.5% 49,731,712 16.4% 16.5% 2,350,863 1,313,082 2,747,254490,949 $ 19.66


5,829,52017 13.1% 0.5% 795,603 13.6% 13.9% 121,737 0 280,48916,200 $29.75Fort Worth CBD

117,752,039517 13.9% 1.3% 17,875,409 15.2% 15.6% 6,640,457 7,014,046 7,287,5212,331,935 $30.24Dallas Suburban

5,041,69130 16.5% 0.7% 866,464 17.2% 19.5% (82,942) 160,781 98,497116,478 $22.31Fort Worth Suburban

151,998,493592 15.5% 1.4% 25,814,616 17.0% 17.4% 6,688,536 7,267,064 8,090,9322,488,099 $29.29Total DFW Market

Class B5,891,95736 15.7% 0.6% 962,070 16.3% 15.9% (46,718) 0 0(23,038) $21.16Dallas CBD

4,205,19844 7.4% 0.2% 320,196 7.6% 8.2% 45,972 0 026,388 $20.99Fort Worth CBD

125,833,8362,369 14.9% 0.8% 19,595,974 15.6% 14.6% (868,189) 1,236,649 663,897(1,010,354) $21.34Dallas Suburban

14,521,016339 16.1% 0.6% 2,416,154 16.6% 16.0% 33,717 134,943 110,910(65,533) $21.92Fort Worth Suburban

150,452,0072,788 14.8% 0.8% 23,294,394 15.5% 14.6% (835,218) 1,371,592 774,807(1,072,537) $21.38Total DFW Market

Class C3,152,69045 8.3% 0.1% 264,347 8.4% 8.2% (48,629) 0 0(6,976) $17.17Dallas CBD

665,55421 0.4% 0.0% 2,976 0.4% 0.3% (2,976) 0 0(906) $19.30Fort Worth CBD

19,625,898820 12.1% 0.1% 2,391,107 12.2% 12.1% (242,928) 0 0(12,598) $18.65Dallas Suburban

4,570,213221 7.3% 0.0% 334,487 7.3% 7.0% 64,777 0 0(15,898) $18.95Fort Worth Suburban

28,014,3551,107 10.6% 0.1% 2,992,917 10.7% 10.6% (229,756) 0 0(36,378) $18.63Total DFW Market

All Classes32,419,890109 21.2% 2.0% 7,503,557 23.1% 23.1% (86,063) 92,237 424,425(6,528) $26.23Dallas CBD

10,700,27282 10.1% 0.4% 1,118,775 10.5% 10.8% 164,733 0 280,48941,682 $26.81Fort Worth CBD

263,211,7733,706 14.2% 1.0% 39,862,490 15.1% 14.8% 5,529,340 8,250,695 7,951,4181,308,983 $25.47Dallas Suburban


330,464,8554,487 14.8% 1.0% 52,101,927 15.8% 15.5% 5,623,562 8,638,656 8,865,7391,379,184 $25.38Total DFW Market



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A

528,101,7yawsserpxE lartneC 00171,12%6.21%1.31733,829%4.0%6.2122 (35,556) $ 29.47

342,573,32DBC sallaD 524,424732,29482,9%0.72%9.62041,772,6%6.2%3.4282 23,486 $ 27.12

064,041sallaD tsaE 028,49200%4.41%1.01571,41%0.1%1.92 6,067 $ 42.66

432,812,63sallaD htroN raF 167 10.1% 1.6% 4,239,509 11.7% 11.8% 4,297,990 4,634,660 2,787,3271,428,790 $ 32.43

025,928,5DBC htroW troF 984,0820737,121%9.31%6.31306,597%5.0%1.3171 16,200 $ 29.75

504,458,91saniloC saL 82 12.2% 1.3% 2,681,087 13.5% 13.7% 1,138,831 685,402 1,821,00035,557 $ 30.03

524,686,01yaweerF JBL 00048,172%4.32%0.22761,253,2%6.1%4.0273 151,164 $ 26.46


105,237,8seitiC-diM 45 18.7% 0.3% 1,656,393 19.0% 19.7% 228,742 871,934 555,000385,787 $ 26.21

574,918htroW troF htroN 4 22.0% 0.0% 180,215 22.0% 28.5% (155,189) 0 053,434 $ 18.12

129,514htroW troF tsaehtroN 00288,03%8.37%8.37531,703%0.0%8.372 0 $ 21.39

605,643,4retneC notserP 000,911385,171)059,93(%4.9%2.21311,825%1.1%1.1132 35,017 $ 42.21


592,608,3htroW troF htuoS 794,89187,061563,14%6.11%0.01411,973%9.0%0.942 63,044 $ 29.11

706,253sallaD tsewhtuoS 00)145,51(%4.4%8.8140,13%0.0%8.83 (15,541) $ 30.77



394,899,151tekraM WFD latoT 592 15.5% 1.4% 25,814,616 17.0% 17.4% 6,688,536 7,267,064 8,090,9322,488,099 $ 29.29

Class B


759,198,5DBC sallaD 00)817,64(%9.51%3.61070,269%6.0%7.5163 (23,038) $ 21.16

016,745,6sallaD tsaE 005,640)604,87(%1.8%6.8452,365%2.0%4.8281 (34,138) $ 21.06

182,684,12sallaD htroN raF 287,48496,612)438,9(%5.41%4.51137,313,3%9.0%6.41804 (116,601) $ 23.23

891,502,4DBC htroW troF 00279,54%2.8%6.7691,023%2.0%4.744 26,388 $ 20.99

965,156,81saniloC saL 237 14.7% 1.6% 2,900,997 15.6% 15.0% (118,630) 352,590 125,913(69,113) $ 20.82

037,240,11yaweerF JBL 129 22.8% 0.7% 2,596,387 23.5% 21.6% (123,248) 0 0(206,024) $ 19.25

158,163,8notneD / ellivsiweL 203 14.2% 1.8% 1,343,366 16.1% 8.9% (586,018) 130,275 48,245(579,967) $ 22.55

055,628,81seitiC-diM 477 14.5% 0.4% 2,798,111 14.9% 14.6% (100,420) 115,149 110,90013,872 $ 20.49

860,113,3htroW troF htroN 000,75500,25)480,78(%3.7%7.9217,223%8.1%4.847 (68,553) $ 23.88

Northeast Fort Worth 3,305,240 00218,25%7.24%1.34886,524,1%0.0%1.3415 (14,260) $ 20.35

851,110,1retneC notserP 00)558,3(%4.7%8.9547,89%0.0%8.912 (23,759) $ 32.39


807,409,7htroW troF htuoS 019,35839,28989,76%5.8%4.8457,766%4.0%1.8412 17,280 $ 23.44



Uptown / Turtle Creek 2,289,00745 12.4% 6.1% 423,259 18.5% 16.5% (120,668) 14,765 0(45,366) $ 36.43

Total DFW Market 150,452,0072,788 14.8% 0.8% 23,294,394 15.5% 14.6% (835,218) 1,371,592 774,807(1,072,537) $ 21.38



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class C

350,439yawsserpxE lartneC 00744,02%6.4%8.4594,44%0.0%8.484 (1,633) $ 21.49

096,251,3DBC sallaD 00)926,84(%2.8%4.8743,462%1.0%3.854 (6,976) $ 17.17

439,926,2sallaD tsaE 00)462,72(%3.9%6.9671,152%2.0%4.9811 (5,409) $ 14.81

851,840,1sallaD htroN raF 00)700,32(%9.51%2.51301,951%5.1%7.3184 7,333 $ 18.37

455,566DBC htroW troF 00)679,2(%3.0%4.0679,2%0.0%4.012 (906) $ 19.30

991,250,1saniloC saL 00649,42%1.8%2.8067,68%0.0%2.802 (1,419) $ 17.84

406,185yaweerF JBL 00163,87%3.41%6.31943,97%0.0%6.3103 3,776 $ 17.75

200,765,1notneD / ellivsiweL 00)772,41(%8.3%8.3323,06%0.0%8.396 (510) $ 17.27

942,798,4seitiC-diM 00676,82%1.21%5.21576,216%0.0%5.21012 (20,006) $ 16.95

210,865htroW troF htroN 00446,31%1.2%9.5205,33%0.0%9.523 (21,793) $ 18.61

086,257htroW troF tsaehtroN 00)537,51(%2.21%5.31004,101%0.0%5.3173 (9,791) $ 18.04

262,183retneC notserP 00995,55%9.4%9.4794,81%0.0%9.461 0 $ 29.91

North US 75 Corridor 2,501,205106 24.1% 0.0% 603,831 24.1% 24.1% (460,091) 0 0(1,330) $ 21.85

125,942,3htroW troF htuoS 00868,66%6.6%1.6585,991%0.0%1.6251 15,686 $ 19.23

685,034,1sallaD tsewhtuoS 00331,41%1.3%2.3702,64%0.0%2.396 (2,267) $ 17.80

947,501,2yaweerF snommetS 00675,95%9.81%5.81524,983%0.0%5.8146 8,197 $ 14.31

Uptown / Turtle Creek 496,897 00)72(%0.8%9.7662,93%9.0%0.722 670 $ 33.50

553,410,82tekraM WFD latoT 1,107 10.6% 0.1% 2,992,917 10.7% 10.6% (229,756) 0 0(36,378) $ 18.63

All Classes

Central Expressway 14,053,585 00)243,65(%4.01%0.11450,745,1%4.0%6.01751 (86,557) $ 27.77

098,914,23DBC sallaD 524,424732,29)360,68(%1.32%1.32755,305,7%0.2%2.12901 (6,528) $ 26.23

400,813,9sallaD tsaE 023,1430)076,501(%5.8%9.8506,828%2.0%7.8203 (33,480) $ 25.98

376,257,85sallaD htroN raF 623 11.8% 1.3% 7,712,343 13.1% 12.9% 4,265,149 4,851,354 2,872,1091,319,522 $ 28.40

272,007,01DBC htroW troF 984,0820337,461%8.01%5.01577,811,1%4.0%1.0128 41,682 $ 26.81

371,855,93saniloC saL 339 13.2% 1.4% 5,668,844 14.3% 14.2% 1,045,147 1,037,992 1,946,913(34,975) $ 25.27

957,013,22yaweerF JBL 196 21.4% 1.1% 5,027,903 22.5% 22.3% 226,953 0 0(51,084) $ 22.83

Lewisville / Denton 10,159,608276 12.3% 1.5% 1,405,899 13.8% 8.0% (589,903) 130,275 48,245(570,085) $ 22.23

003,654,23seitiC-diM 009,566380,789899,651%5.51%6.51971,760,5%3.0%3.51237 379,653 $ 21.82

555,896,4htroW troF htroN 110 10.4% 1.3% 536,429 11.4% 10.4% (228,629) 52,005 57,000(36,912) $ 20.38


629,837,5retneC notserP 000,911385,171497,11%7.8%2.11553,546%8.0%4.0106 11,258 $ 40.06


425,069,41htroW troF htuoS 704,251917,342222,671%9.8%3.8354,642,1%4.0%9.7093 96,010 $ 23.45


Stemmons Freeway 14,326,291 0000,36878,061%2.32%1.32705,313,3%2.0%9.22671 14,157 $ 16.95

Uptown / Turtle Creek 13,653,053 410,503,1567,412230,441%1.11%3.11962,145,1%9.1%4.9311 (26,178) $ 39.78

Total DFW Market 330,464,8554,487 14.8% 1.0% 52,101,927 15.8% 15.5% 5,623,562 8,638,656 8,865,7391,379,184 $ 25.38




Mercedes-Benz Financial Services 13650 Heritage Pky North Fort Worth 200,000 A New Dec-17

T-Mobile 7668 Warren Pky Far North Dallas 158,298 A Renewal Dec-17

Gartner, Inc. 6011 Connection Dr Las Colinas 152,086 A New Nov-17

Berry Appleman and Leiden LLP 2400 N Glenville Dr North US-75 Corridor 67,380 A New Oct-17

Winston & Strawn LLP 2121 Pearl St Uptown/Turtle Creek 55,917 A New Oct-17

Goodman Networks, Inc. 2801 Network Blvd Far North Dallas 52,944 A Renewal Nov-17

Government SDA 2350 Valley View Ln LBJ Freeway 47,637 B New Nov-17

Alston & Bird 2200 Ross Ave Dallas CBD 34,875 A New Dec-17

Cyxtera 15601 Dallas Pky Far North Dallas 30,913 A New Nov-17

Aecom Hunt 13455 Noel Rd LBJ Freeway 30,637 A New Oct-17

Shore Chan Bragalone DePumpo LLP 901 Main St Dallas CBD 27,675 A Renewal Nov-17

Audatex 7701 Las Colinas Rdg Las Colinas 27,517 A New Oct-17

RealPage, Inc. 2221 Lakeside Blvd North US-75 Corridor 27,212 A New Oct-17

Guidon Energy 545 E John Carpenter Fwy Las Colinas 22,360 A New Oct-17

McKool Smith, P.C. 300 Crescent Ct Uptown/Turtle Creek 20,681 A Renewal Nov-17

Leasing Activity Leasing activity is down from 2016 in all but two submarkets — Fort Worth CBD and Lewisville-Denton. Leasing activity in Q4 2017 was 4.3 million square feet and the total for 2017 is 17.8 million square feet.


Frisco Square Far North Dallas Dec-17 $45,500,000 396,689 $115 A Maxus Realty Trust

Hidden Grove at 12404 Park Central LBJ Freeway Nov-17 $25,562,790 232,389 $111 A Trinity Private Equity Group

FedEx Office Hequarters Far North Dallas Nov-17 $79,650,000 264,000 $302 A PRP Property Management, AXA Equitable Financial Services

Trinity Towers Stemmons Freeway Oct-17 $50,000,000 634,381 $79 A Stanton Road Capital, LLC

One Allen Center North US 75 Corridor Oct-17 $31,600,000 150,509 $210 B Accesso Partners

Zales Corporation HQ Las Colinas Oct-17 $14,745,000 358,884 $41 A CW Capital

Sales Activity Investment activity in 2017 totaled $3.5 billion. While considerably behind the record year of 2016, 2017’s total is only 6.6% behind 2015’s yearly total. Investors continue to be interested in DFW as they seek strong, stable returns outside of the high-priced coastal markets. Nationally, office investment sales saw a drop-off of 28% from Q4 2016 to Q4 2017, signaling a slowing in the investment markets. Dallas-Fort Worth had the eighth highest sales volume in 2017, behind the major coastal markets and Chicago.




LAS COLINAS 1.9K SF

FAR NORTH DALLAS 2.9M SF

TOTA

L: 8

.9M

SF

15.8% 1,083,524 SFVACANCY NET ABSORPTION


Q4 2017 HIGHLIGHTS

CLASS A: 46% CLASS B: 46% CLASS C: 8%TOTAL INVENTORY BY CLASS 26.0%

ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

53919.2M SF

15%

43631.5M SF20.9%

45870.7M SF

20.4%

13344.7M SF

19.9%

3019.5M SF22.5%

1622M SF25.9%

152.0M SF150.7M SF

27.9M SF

UNDERCONSTRUCTION

SUBMARKET SF

MID-CITIES 665K SF



% LEASED


+E BUILDINGS

KPMG Plaza at Hall Arts 2323 Ross Ave Dallas CBD 459,383 2015 82% 110,330 $48.00 +E 2323 Ross Holdings, LLC



Tollway Center 14675 Dallas Pky Far North Dallas 197,740 2016 91% 18,064 $34.50 +E Cawley Management, LLC

Premier Place 5910 N Central Expy Central Expressway 409,894 1985 86% 56,168 $34.50 +E CBRE Global Investors Ltd

Frisco Bridges Place 2600 N Dallas Pky Far North Dallas 170,000 2016 89% 18,500 $34.50 +E Randy Heady & Company Realtors

NNN BUILDINGS




1900 Pearl 1900 N Pearl St Dallas CBD 261,400 2018 20% 208,769 $37.00 NNN 1900 Pearl Street JV, LLC

Terraces at Douglas Center 5960 Berkshire Ln Preston Center 171,583 2017 10% 154,357 $35.50 NNN Lionstone Investments

Harwood No. 2 2728 N Harwood St Uptown/Turtle Creek 176,384 1996 88% 20,678 $35.00 NNN Harwood International







RESEARCHERS:


KARI BEETSResearch AssociateDIRECT +1 214 217 [email protected]

77

20

30

30

308080

820

820

820

DNT

DNT

LLT

LLT

45

45

75

75

1709

12

12

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12

12

12

635

635

408

161

161

161

114

121

121

121

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303

352

190

190

190

78

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183

183

183

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67

67

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360

377

377

377

380

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287

287

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114

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DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTER

WINGREN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10


1 1014.1m SF 11% Vac UC = None $ 27.77 PSF 4.7m SF 11.4% Vac UC = 57K SF $ 20.38 PSF

2 1132.4m SF 23.1% Vac UC = 424.4K SF $ 26.23 PSF 4.5m SF 41% Vac UC = None $ 20.44 PSF


4 1358.8m SF 13.1% Vac UC = 2,872K SF $ 28.40 PSF 38m SF 17.6% Vac UC = 653K SF $ 24.57 PSF

5 1410.7m SF 10.5% Vac UC = 280.5K SF $ 26.81 PSF 15m SF 8.3% Vac UC = 152.4K SF $ 23.45 PSF

6 1539.6m SF 14.3% Vac UC = 1946.9K SF $ 25.27 PSF 4.8m SF 8.5% Vac UC = None $ 19.13 PSF

7 1622.3m SF 22.5% Vac UC = None $ 22.83 PSF 14.3m SF 23.1% Vac UC = None $ 16.95 PSF


932.5m SF 15.6% Vac UC = 665.9K SF $ 21.82 PSF 330.5m SF 15.8% Vac UC = 8,866K SF $ 25.38 PSF


Total Market

157 Bldgs

109 Bldgs

302 Bldgs

623 Bldgs

82 Bldgs

339 Bldgs

196 Bldgs

276 Bldgs

110 Bldgs

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

90 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

Stemmons Freeway


732 Bldgs

60 Bldgs

570 Bldgs

390 Bldgs

162 Bldgs

176 Bldgs

113 Bldgs

4,487 Bldgs

Large corporate relocations propel DFW absorption




Large corporate relocations continue to generate buzz in the Dallas-Fort Worth real estate market. So far, Far North Dallas has seen more absorption in 2017 than the whole market had in all of 2016. After delivering their 2.1 million square foot headquarters in June 2017, Toyota has occupied the space, accounting for 70% of Far North Dallas’ YTD absorption. 2017 has already exceeded 2016’s annual net absorption by 1.1 million square feet. Multitenant office product has accounted for only 20% of the total net absorption and is lagging behind the same period in 2016 by almost a million square feet. Corporate relocations have been the fuel for this DFW real estate boom, but will this continue?

In September, Amazon unleashed a flurry of speculation by announcing it will build HQ2 — a second headquarters located in another major North American metro. The announcement sparked hundreds of proposals from cities and developers across the metroplex hoping that they have what it takes to attract one of the largest, most innovative companies in the nation. While prices have increased and the labor market is tightening, DFW still compares favorably to many competitors. Amazon already has an office presence in Galleria Towers and over 8 million square feet of warehouse space. Could Amazon be DFW’s next big Toyota?

A Look Ahead> Major corporate move-ins will boost 2017’s net absorption

significantly higher than in 2016. To keep this from being the peak, DFW will need to woo more corporate relocations, as in-market expansions are insufficient to maintain such high demand.

> Construction activity will continue to taper, as major corporate campuses deliver and new groundbreakings slow. So far in 2017, 49 buildings totaling 2.5 million square feet have broken ground, just over a quarter of the 8.8 million square feet that broke ground in 2016. Barring any major corporate announcements, expect construction starts to slow as vacancy is higher than in 2015 and lenders are skittish about being caught at the end of the cycle.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 15.5% 17.2% 14.7%


Absorption (Thousand Square Feet) 493 760 179

New Supply (Thousand Square Feet) 867 587 279

Under Construction (Thousand Square Feet) 9,451 8,430 1,022


Average (Gross) $25.47 $29.45 $21.22




AnnualChange

Quarterly Change

Quarterly Forecast*

Vacancy

Net Absorption

Under Construction

Rental Rate

*Projected


Market Highlights> Job growth slowed slightly in DFW, as the metro added less than 100,000 jobs from

August 2016 to August 2017. Year-to-date Fort Worth has outperformed Dallas, with employment growth at an annualized 1.6% to 1.1% respectively. The unemployment rate in Dallas increased slightly to 3.9% but continues to trail the nationwide rate of 4.5%. Manufacturing and Mining and Construction led the metro with over 3% employment growth each, while office-using sectors experienced modest 1-2% growth.

> The market delivered 870,000 square feet in Q3 2017, and approximately 40% was leased. After the Toyota North American Headquarters delivered in Q2 2017, the construction pipeline after Q3 was about 57% multitenant speculative office, and the overall pipeline was 60% leased or owned.

Vacancy RateThe overall vacancy rate was flat at 15.5% from Q2 2017 to Q3 2017. The vacancy rate has held steady at 15.5% throughout 2017. Class A vacancy decreased 0.2% to 17.2% from Q2 to Q3, Class B vacancy remained the same as last quarter at 14.7%.

Far North Dallas saw the largest improvement from the prior quarter, dropping from 14.1% in Q2 to 12.7% in Q3 as several new projects saw significant move-ins. LBJ Freeway has the highest year-over-year improvement, lowering the vacancy rate 2.4% to 21.9%. It is likely this trend will continue as tenants experience higher rental rates in the Far North Dallas area, Preston Center, and now along Central Expressway.

Rental RatesRental rates continued to climb faster in 2017 than they had in 2016. Overall rates rose 1.5% from Q2 to Q3, reaching $25.47 overall — 5.4% higher than this same time in 2016. Class A rates were up 1.5% as well, rising to $29.45 overall, and Class B rates broke $21 for the first time.

Central Expressway saw the highest increase in rates from $27.21 in Q2 up 10.1% to $29.97 in Q3. Preston Center saw overall rates jump 7.6%, due to the start of construction on Park Plaza at 6517 Hillcrest Ave. The only office building in the elite University Park neighborhood is asking rates of $55 triple net for the 119,000 square foot property. This pushed Preston Center’s Class A average to $42.17, surpassing Uptown’s average of $40.78 for Class A space.

Absorption & Demand Net absorption slowed in Q3 2017, totaling less than 500,000 square feet. The 2.1 million square foot Toyota North American Headquarters registered as being fully occupied in Q2 2017, raising Q2’s absorption total to 2.5 million square feet. Although market-wide absorption is strong, eight of the seventeen submarkets have negative year-to-date net absorption. While there is significant overall growth, it is disproportional in Far North Dallas (3 million SF YTD) and Las Colinas (1 million SF YTD); all other submarkets have seen less than 300,000 square feet of absorption each.

While Class A net absorption is reaching levels not seen since the early 2000s, Class B net absorption shows the opposite trend, with only 116,000 square feet through Q3. This is the lowest total seen in the first three quarters since 2003.

0%

5%

10%

15%

20%

25%

0

2,500

5,000

7,500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

New Supply Absorption Vacancy Rate

Thou

sand

s of

Squ

are

Feet

Vaca

ncy

Rate



DFW 4.1% 3.9%

Texas 4.9% 4.5%

U.S. 5.0% 4.5%


# of Jobs Added

DFW 2.8% 96.7k

Texas 2.4% 286.3k

U.S. 1.5% 2,099.0k



$15

$19

$23

$27

$31

$35

10%

12%

14%

16%

18%

20%

2009 2011 2013 2015 2017

Rent

al R

ate

(Gro

ss)

Vaca

ncy

Rate

Class A Rental Rate Total Market Rental Rate

Class A Vacancy Rate Total Market Vacancy Rate

-500

0500

1,000

1,5002,000

2,5003,0003,500

4,0004,500

5,000

2013 2014 2015 2016 2017

Thou

sand

s of

Squ

are

Feet


New Supply, Absorption & Vacancy Rate0%

5%

10%

15%

20%

25%

0

2,500

5,000

7,500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Thou

sand

of S

quar

e Fe

et

Vaca

ncy

Rate



295,184,7233Q 7102 4,435 14.6% 0.9% 50,847,549 15.5% 15.5% 4,208,752 6,000,105 9,451,254492,744

461,406,6232Q 7102 4,415 14.7% 0.8% 50,473,334 15.5% 15.5% 3,716,008 5,133,146 9,636,8702,494,560

206,836,3231Q 7102 4,396 14.7% 0.8% 50,051,564 15.5% 15.3% 1,221,448 2,180,784 11,728,9011,221,448

818,754,1234Q 6102 4,377 14.6% 0.7% 49,092,228 15.3% 15.2% 3,117,471 5,254,372 12,923,609475,733

953,835,0233Q 6102 4,361 14.5% 0.7% 48,648,502 15.2% 15.3% 2,641,738 4,334,913 12,775,7451,838,094

450,087,4133Q 5102 4,284 14.3% 0.6% 46,824,266 14.9% 14.7% 5,335,358 5,968,380 6,958,0691,360,091

702,411,8033Q 4102 4,217 14.5% 0.7% 46,830,230 15.2% 15.7% 5,153,437 3,097,654 7,266,0022,502,881

188,383,4033Q 3102 4,154 15.5% 0.6% 49,033,690 16.1% 16.5% 2,416,022 1,823,875 5,789,9532,030,487

943,972,2033Q 2102 4,115 15.9% 0.6% 49,834,631 16.5% 16.8% 1,890,676 1,032,425 2,696,1051,307,175

Class A23,375,24328 25.2% 1.9% 6,350,430 27.2% 26.3% (64,006) 92,237 322,110(202,640)Dallas CBD

5,889,85117 13.3% 0.5% 811,803 13.8% 13.8% 105,537 0 280,489686Fort Worth CBD

116,116,720507 14.1% 1.2% 17,764,422 15.3% 15.8% 4,480,251 4,743,137 7,728,6581,114,587Dallas Suburban

4,911,76329 19.1% 0.9% 982,942 20.0% 16.9% (199,420) 160,781 98,497(152,247)Fort Worth Suburban

150,293,577581 16.0% 1.3% 25,909,597 17.2% 17.4% 4,322,362 4,996,155 8,429,754760,386Total DFW Market

Class B5,909,02036 15.4% 0.5% 939,032 15.9% 17.3% (23,680) 0 082,675Dallas CBD

4,053,56344 8.3% 0.3% 346,584 8.6% 8.5% 19,584 0 0(3,235)Fort Worth CBD

125,088,889 14.1% 0.7% 18,372,932 14.7% 14.6% 42,731 918,058 900,42599,825Dallas Suburban

14,100,891334 15.8% 0.6% 2,312,656 16.4% 16.2% 77,564 85,892 121,075119Fort Worth Suburban

149,152,363 14.1% 0.7% 21,971,204 14.7% 14.7% 116,199 1,003,950 1,021,500179,384Total DFW Market

Class C3,152,54645 8.2% 0.0% 257,371 8.2% 7.8% (41,653) 0 0(12,345)Dallas CBD

665,55421 0.3% 0.0% 2,070 0.3% 0.2% (2,070) 0 0(750)Fort Worth CBD

19,582,846816 12.1% 0.1% 2,402,630 12.3% 10.0% (263,662) 0 0(437,638)Dallas Suburban

4,634,706213 6.6% 0.0% 304,677 6.6% 6.7% 77,576 0 03,707Fort Worth Suburban

28,035,6521,095 10.5% 0.1% 2,966,748 10.6% 9.0% (229,809) 0 0(447,026)Total DFW Market

All Classes32,436,809109 21.8% 1.5% 7,546,833 23.3% 22.9% (129,339) 92,237 322,110(132,310)Dallas CBD

10,608,96882 10.6% 0.4% 1,160,457 10.9% 10.9% 123,051 0 280,489(3,299)Fort Worth CBD

260,788,4553,668 13.9% 0.9% 38,539,984 14.8% 14.8% 4,259,320 5,661,195 8,629,083776,774Dallas Suburban

23,647,360576 14.7% 0.6% 3,600,275 15.2% 14.4% (44,280) 246,673 219,572(148,421)Fort Worth Suburban

327,481,5924,435 14.6% 0.9% 50,847,549 15.5% 15.5% 4,208,752 6,000,105 9,451,254492,744Total DFW Market

$ 25.47

$ 25.10

$ 24.79

$ 24.39

$ 24.17

$ 22.88

$ 21.40

$ 20.37

$ 19.67

$27.39

$29.73

$30.29

$24.66

$29.45

$21.01

$20.17

$21.29

$20.90

$21.22

$17.73

$20.39

$18.31

$18.82

$18.35

$26.47

$26.39

$25.55

$21.68

$25.47

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT






342,573,32DBC sallaD 011,223732,29)600,46(%3.62%2.72034,053,6%9.1%2.5282 (202,640) $ 27.39

064,041sallaD tsaE 028,4920)760,6(%1.01%4.41242,02%0.1%4.312 (6,067) $ 42.66

239,589,43sallaD htroN raF 161 10.1% 1.4% 4,023,440 11.5% 11.8% 2,922,223 3,022,670 4,590,284149,354 $ 32.75

158,988,5DBC htroW troF 984,0820735,501%8.31%8.31308,118%5.0%3.3171 686 $ 29.73

408,747,91saniloC saL 82 12.3% 1.4% 2,716,644 13.8% 15.2% 1,103,274 685,402 671,000402,991 $ 30.14

144,486,01yaweerF JBL 00676,021%7.42%4.32133,305,2%7.1%7.1273 133,753 $ 26.17

557,474notneD / ellivsiweL 000%7.2%7.2206,21%0.0%7.26 0 $ 26.66

666,733,8seitiC-diM 43 19.5% 0.2% 1,642,311 19.7% 20.9% (157,045) 472,065 435,000189,685 $ 26.37

117,527htroW troF htroN 3 32.2% 0.0% 233,649 32.2% 2.6% (208,623) 0 0(214,443) $ 20.01


905,981,4retneC notserP 385,0920)769,47(%2.9%3.9745,193%9.0%5.822 (7,251) $ 42.17


391,177,3htroW troF htuoS 794,89187,061)976,12(%3.31%7.11851,244%2.1%5.0142 59,400 $ 30.37

706,253sallaD tsewhtuoS 000%9.3%4.4005,51%0.0%4.43 (1,836) $ 25.34



775,392,051tekraM WFD latoT 581 16.0% 1.3% 25,909,597 17.2% 17.4% 4,322,362 4,996,155 8,429,754760,386 $ 29.45

Class B

Central Expre 223,100,6yawss 00)518,101(%5.8%6.9774,675%3.0%3.968 (65,118) $ 29.78

020,909,5DBC sallaD 00)086,32(%3.71%9.51230,939%5.0%4.5163 82,675 $ 21.01

061,126,6sallaD tsaE 000,030)759,69(%0.8%2.8241,345%2.0%0.8181 (12,435) $ 20.53

701,383,12sallaD htroN raF 806,831496,301105,19%2.51%5.41350,701,3%6.0%9.31404 143,760 $ 22.70

365,350,4DBC htroW troF 00485,91%5.8%6.8485,643%3.0%3.844 (3,235) $ 20.17

596,924,81saniloC saL 319,551953,933)842,91(%6.41%1.51566,087,2%3.1%5.41232 (93,006) $ 21.02

154,859,01yaweerF JBL 00677,28%3.12%9.02363,582,2%8.0%1.02821 47,036 $ 19.04

559,461,8notneD / ellivsiweL 431,03877,701)558,21(%5.01%4.01542,648%4.1%9.8202 79,817 $ 21.96

162,927,81seitiC-diM 471 14.2% 0.3% 2,714,711 14.5% 13.4% (103,156) 26,000 171,649(194,117) $ 20.55

285,792,3htroW troF htroN 560,07049,83)135,81(%9.6%3.7490,142%8.1%5.537 618 $ 23.18


758,279retneC notserP 00409,91%0.9%7.7689,47%0.0%7.712 12,172 $ 31.67


841,537,7htroW troF htuoS 010,15259,64320,92%9.7%5.8431,066%4.0%1.8012 (22,111) $ 23.35

315,940,3sallaD tsewhtuoS 447,01820,27939,731%8.11%5.11304,053%1.0%4.1198 57,923 $ 18.76

669,286,7yaweerF snommetS 00)471,93(%3.72%0.72510,770,2%8.0%2.6299 22,612 $ 16.21

Uptown / Turtle Creek 2,573,067 484,13567,41)203,57(%8.41%7.41398,773%2.5%5.964 15,455 $ 33.92

363,251,941tekraM WFD latoT 005,120,1059,300,1991,611%7.41%7.41402,179,12%7.0%1.41957,2 179,384 $ 21.22

Class A

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT



Class C

010,719yawsserpxE lartneC 00080,22%4.4%7.4268,24%3.0%4.474 (2,360) $ 24.33

645,251,3DBC sallaD 00)356,14(%8.7%2.8173,752%0.0%2.854 (12,345) $ 17.73

668,146,2sallaD tsaE 00)394,42(%9.8%2.9590,242%2.0%0.9711 (7,689) $ 15.18

133,159sallaD htroN raF 00)046,91(%4.61%6.51639,741%6.1%0.4174 8,550 $ 16.78

455,566DBC htroW troF 00)070,2(%2.0%3.0070,2%0.0%3.012 (750) $ 20.39

991,802,1saniloC saL 00568,21%3.6%2.8148,89%0.0%2.822 (23,245) $ 17.96

453,736yaweerF JBL 00580,16%3.52%2.51526,69%0.0%2.5113 64,505 $ 17.77

620,146,1notneD / ellivsiweL 00)805,9(%1.3%3.4657,96%1.0%1.437 (19,018) $ 17.82

458,278,4seitiC-diM 00920,92%6.11%5.21229,606%0.0%5.21802 (42,188) $ 16.69

097,035htroW troF htroN 00831,53%0.2%6.0790,3%0.0%6.092 7,754 $ 18.87

101,199htroW troF tsaehtroN 00)449,5(%3.9%2.9906,19%0.0%2.983 335 $ 17.29

262,183retneC notserP 00995,55%5.5%9.4794,81%0.0%9.461 2,419 $ 29.91

North US 75 Corridor 2,475,487104 24.3% 0.0% 600,401 24.3% 6.3% (457,761) 0 0(444,300) $ 21.22

518,211,3htroW troF htuoS 00283,84%6.6%7.6179,902%0.0%7.6641 (4,382) $ 19.36

503,993,1sallaD tsewhtuoS 00004,61%8.3%9.2731,14%0.0%9.276 11,608 $ 17.18


Uptown / Turtle Creek 493,494 00)796(%6.8%1.8639,93%5.0%6.722 2,453 $ 32.90

256,530,82tekraM WFD latoT 1,095 10.5% 0.1% 2,966,748 10.6% 9.0% (229,809) 0 0(447,026) $ 18.35

All Classes


908,634,23DBC sallaD 109 21.8% 1.5% 7,546,833 23.3% 22.9% (129,339) 92,237 322,110(132,310) $ 26.47

684,304,9sallaD tsaE 028,4230)715,721(%3.8%6.8974,508%2.0%3.8003 (26,191) $ 24.87

073,023,75sallaD htroN raF 612 11.6% 1.1% 7,278,429 12.7% 13.2% 2,994,084 3,126,364 4,728,892301,664 $ 28.53

869,806,01DBC htroW troF 984,0820150,321%9.01%9.01754,061,1%4.0%6.0128 (3,299) $ 26.39

896,583,93saniloC saL 336 13.2% 1.3% 5,596,150 14.2% 14.6% 1,096,891 1,024,761 826,913286,740 $ 25.67

642,082,22yaweerF JBL 196 20.7% 1.2% 4,885,319 21.9% 23.0% 264,537 0 0245,294 $ 22.48

Lewisville / Denton 10,280,736 431,03877,701)363,22(%9.8%0.9306,829%2.1%9.7182 60,799 $ 22.45

187,939,13seitiC-diM 722 15.3% 0.2% 4,963,944 15.5% 15.1% (231,172) 498,065 606,649(46,620) $ 21.91

380,455,4htroW troF htroN 560,07049,83)610,291(%7.5%5.01048,774%3.1%2.9501 (206,071) $ 21.46


826,345,5retneC notserP 385,0920635%9.8%7.8030,584%7.0%1.895 7,340 $ 40.00

North US 75 Corridor 37,413,523559 17.3% 1.0% 6,835,115 18.3% 17.1% (163,938) 554,434 505,334(141,211) $ 24.53

651,916,41htroW troF htuoS 705,941337,702627,55%0.9%0.9362,213,1%5.0%5.8083 32,907 $ 24.49

524,108,4sallaD tsewhtuoS 447,01820,27933,451%8.8%5.8040,704%1.0%4.8951 67,695 $ 18.79



Total DFW Market 327,481,5924,435 14.6% 0.9% 50,847,549 15.5% 15.5% 4,208,752 6,000,105 9,451,254492,744 $ 25.47

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT


Sources: CoStar Property, Colliers Research


Q3 2017 Top Office Lease TransactionsTENANT PROPERTY SUBMARKET SF LEASED BUILDING CLASS DEAL TYPE SIGN DATE

NTT DATA, Inc* 6501 Legacy Dr Far North Dallas 232,744 A New Sep-17

Frontier Communications 805 S Central Expy North US-75 Corridor 83,662 B Renewal Jul-17

GENPACT 3300 E Renner Rd North US-75 Corridor 63,603 B New Jul-17

Alkami Technology 5601 Granite Pky Far North Dallas 53,150 A New Sep-17

Cognizant 5001 Statesman Dr Las Colinas 48,277 B New Aug-17

WeWork 5049 Edwards Ranch Rd South Fort Worth 47,714 B New Sep-17

Albertson, LLC 2401 E Randol Mill Rd Mid-Cities 45,740 B New Aug-17

The University of Texas at Dallas 3000-3030 Waterview Pky North US-75 Corridor 45,642 B New Jul-17

XTO Energy 801 Grove St Fort Worth CBD 43,985 B New Aug-17

The Delta Companies 3100 Olympus Blvd Las Colinas 38,000 A New Jul-17

Weaver 2821 W 7th St South Fort Worth 36,334 A Renewal Aug-17

Learfield Communications, LLC 2400 N Dallas Pky Far North Dallas 33,264 A Renewal Jul-17

WeWork 300 Throckmorton St Fort Worth CBD 31,296 A New Sep-17

Regus 222 W Las Colinas Blvd Las Colinas 31,006 A Renewal Aug-17

Convergys Corporation 17787 Waterview Pky North US-75 Corridor 29,524 A New Jul-17

Leasing Activity Leasing activity continues to lag behind 2016. Leasing activity for Q3 was 3.9 million square feet, and year-to-date activity is 12.9 million square feet.


Raytheon Headquarters North US-75 Corridor Aug-17 $110,001,399 486,323 $226 A Property Reserve Inc (Church of LDS)

One Twenty Five Las Colinas Sep-17 $83,545,371 442,039 $189 A KBS Strategic Opportunity REIT

Turtle Creek Village Uptown / Turtle Creek Jul-17 $60,000,917 315,678 $190 A CIM Group

Preston Plaza Preston Center Aug-17 $39,628,377 259,009 $153 A Tanglewood Property Group

Gramercy Center Far North Dallas Jul-17 $34,099,354 256,155 $133 B ATCAP Partners

Berkshire at Preston Center Preston Center Sep-17 $68,425,500 182,468 $375 A TA Realty

2811 McKinney Avenue Uptown / Turtle Creek Sep-17 $29,300,242 94,095 $311 B Western Securities LTD

Rochelle Park Las Colinas Sep-17 $9,999,978 80,418 $124 B Young Woong Park

One Preston Center Preston Center Jul-17 $17,618,000 76,600 $230 A Pillar Commercial (JV with Artemis)

Uptown Court Uptown / Turtle Creek Aug-17 $23,699,791 75,956 $312 B Hall Capital

Sales Activity Investment activity in 2017 has been steady, surpassing the volume through three quarters of 2014 and 2015, while lagging considerably behind the unusually high total for 2016. Year-to-date, the market has seen $3.2 billion in office sales, about $400 million behind the first three quarters of 2016, but ahead of the $2.4 billion sold through Q1-Q3 2015.

*Colliers Transaction - Represented Landlord

Sources: RCA, Costar, Colliers Research




LAS COLINAS 827K SF


TOTA

L: 1

1.5M

SF

15.5% 429,744 SFVACANCY NET ABSORPTION


Q3 2017 HIGHLIGHTS


ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

53619.1M SF13.9%

43831.6M SF20.0%

45169.7M SF

19.9%

13645.6M SF

20.6%

3119.9M SF22.4%

1621.9M SF24.8%

150.3M SF149.2M SF

27.9M SF

UNDERCONSTRUCTION

SUBMARKET SF

MID-CITIES 606K SF



% LEASED


+E BUILDINGS


Chase Tower 2200 Ross Ave Dallas CBD 1,255,473 1987 76% 347,942 $35.00 +E Ecom Real Estate Mgmt, Inc

Tollway Center 14675 Dallas Pky Far North Dallas 197,740 2016 91% 28,064 $34.50 +E Lionstone Investments

Premier Place 5910 N Central Expy Central Expressway 409,894 1985 85% 88,674 $34.50 +E Fortis Property Group, LLC

Frisco Bridges Place 2600 N Dallas Pky Far North Dallas 170,000 2016 83% 34,389 $34.50 +E Intercity Investment Properties, Inc

The Urban Towers 222 W Las Colinas Blvd Las Colinas 848,939 1983 89% 168,039 $34.50 +E Westdale RE Investment & Mgmt

NNN BUILDINGS


No.10 2850 N Harwood St Uptown /Turtle Creek 231,098 2018 5% 220,549 $38.09 NNN Harwood International

McKinney & Olive 2021 McKinney Ave Uptown /Turtle Creek 536,000 2016 92% 44,184 $38.00 NNN Crescent Real Estate Equities LLC

1900 Pearl 1900 N Pearl St Dallas CBD 261,400 2017 20% 208,769 $37.00 NNN 1900 Pearl Street JV, LLC

The Terraces at Douglas Ctr 5960 Berkshire Ln Preston Center 171,583 2017 0% 171,583 $35.50 NNN Lionstone Investments

The Epic Deep Ellum Good Latimer Expy & Elm S East Dallas 294,820 2019 0% 294,820 $35.00 NNN Westdale/KDC






Colliers International1717 McKinney Avenue, Suite 900 Dallas, Texas 75202+1 214 692 1100colliers.com/texas/dallas

RESEARCHERS:



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ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


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1 1014m SF 10.8% Vac UC = None $ 29.97 PSF 4.6m SF 10.5% Vac UC = 70.1K SF $ 21.46 PSF



4 1357.3m SF 12.7% Vac UC = 4,729K SF $ 28.53 PSF 37.4m SF 18.3% Vac UC = 505K SF $ 24.53 PSF

5 1410.6m SF 10.9% Vac UC = 280.5K SF $ 26.39 PSF 14.6m SF 9% Vac UC = 149.5K SF $ 24.49 PSF


7 1622.3m SF 21.9% Vac UC = None $ 22.48 PSF 14.4m SF 23% Vac UC = None $ 16.96 PSF

8 1710.3m SF 9% Vac UC = 30.1K SF $ 22.45 PSF 14m SF 10.8% Vac UC = 1,305K SF $ 39.07 PSF



Stemmons Freeway


722 Bldgs

59 Bldgs

559 Bldgs

380 Bldgs

159 Bldgs

175 Bldgs

114 Bldgs

4,435 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

91 Bldgs

Total Market

155 Bldgs

109 Bldgs

300 Bldgs

612 Bldgs

82 Bldgs

336 Bldgs

196 Bldgs

281 Bldgs

105 Bldgs

Optimism still high in DFW office market




The flight to quality continues to be a trend throughout the market. As the U.S. economy continues slow, steady growth tenants are taking advantage of the opportunity to restructure and refresh their space. For some, this means consolidating space in a higher-quality building by creating open office concepts or eliminating storage, causing negative market-wide absorption for Class B in the first half of the year. Examples of this include EnLink Midstream, who recently moved from Class B space in Uptown to One Arts Plaza, and Pioneer Natural Resources, who was in Class A space in Williams Tower but was optimistic enough to kick-start its new headquarters in the mixed-use Hidden Ridge development in Las Colinas.

Also during this quarter, we saw the fulfillment of Legacy West’s vision. Legacy West Urban Village held its grand opening in June with most of its 300,000 square feet of space leased. For the office market, Toyota moved its first batch of employees into its new campus and will continue moving people in throughout the year. Gaedeke’s big bet of speculative space in Far North Dallas paid off with the move-in of NTT Data. However, there are still concerns about traffic and lack of public transit options to attract retail workers who cannot afford rising costs in the northern suburbs.

A Look Ahead> Rental rates will continue to rise in key submarkets as

landlords shift the rent structure to triple net, raising the overall cost to the tenant. While Uptown began this trend, it has rippled into other markets such as Preston Center and Far North Dallas and is beginning to catch on in Las Colinas. Expect overall rental rates to rise 5-7% in major submarkets over the next year.

> Sky-high land prices in Uptown will discourage future office developers — The Union may be the last large office project in the submarket for this cycle. We will continue to see reinvestment in the areas adjacent to Uptown such as the Arts District and Dallas CBD.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 15.4% 17.2% 14.7%



New Supply (Thousand Square Feet) 1,252 755 497



Average $25.13 $28.99 $21.05




AnnualChange

Quarterly Change

Quarterly Forecast*

Vacancy

Net Absorption

Under Construction

Rental Rate

*Projected


Market Highlights> The pace of DFW’s job growth slowed slightly, but the metroplex still added

317 jobs per day. Labor force saturation is starting to be a concern with DFW’s unemployment rate at 3.8%, 0.3% below the national average. However, this is not slowing corporate tenants’ hiring spree. People continue to move to DFW for jobs and companies continue to move for the labor.

> The construction pipeline remains split between build-to-suits and spec office space. Spec properties that delivered in Q2 2017 were 54% leased at the end of the quarter, and of the 11 million square feet under construction, 65% were leased.

Vacancy RateThe vacancy rate continued its gradual climb. Vacancy increased slightly from 15.2% in Q1 2017 to 15.4% in Q2 2017. Class A vacancy increased 0.1% to 17.2%, and Class B vacancy increased 0.2% to 14.7%.

Far North Dallas and the Fort Worth CBD both saw a 0.6% improvement in overall vacancy rate from Q1 to Q2. New developments continue to see high activity in Far North Dallas as new projects saw significant absorption this quarter, including The Star in Frisco (67,000 SF), Legacy West (66,000 SF), and One Legacy West (NTT Data - 126,000 SF). Despite several large move-outs, the Fort Worth CBD still improved its overall vacancy rate largely due to the Aloft hotel taking 100,000 square feet out of the market in One City Place, the old Radio Shack building.

Rental RatesRental Rates continue to break records as rates rose to a new overall high of $25.13. This is the first time the DFW market has topped $25 overall. Class A rental rates almost broke a new barrier, reaching $28.99 overall.

Las Colinas saw the greatest increase in average asking rates of all the major markets increasing 5% to $25.61. East Dallas has also seen a 29% leap in rental rates from the prior year due solely to the start of construction and leasing for The Epic, whose asking rates of $35.00 triple net seem more in line with Uptown than artsy Deep Ellum. Class A rental rates in Uptown continue to hold steady, increasing only 0.8% quarter-over-quarter and 4.2% year-over-year, a decline from large jumps seen in 2015.

Absorption & Demand Net absorption for Q2 2017 was 509,727 square feet, one-third of the prior quarter’s absorption level. Year-to-date net absorption stands at 2 million square feet, 800,000 square feet ahead of this time in 2016. With several large properties still expected to deliver by year-end, the market continues to be on track for a record year.

Far North Dallas saw the highest absorption level, bolstered by Toyota starting its move to its North American Headquarters, occupying 400,000 square feet of its 2 million square foot campus. Mid-Cities saw the largest negative absorption, as CoreLogic, who moved into its new Hackberry Creek headquarters last quarter, vacated 220,000 square feet at Solana. While many submarkets showed strong positive absorption in the quarter, Las Colinas, Mid-Cities, and Northeast Fort Worth all had approximately 100,000 square feet of negative absorption, significantly lowering the market-wide level.

0%

5%

10%

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25%

0

2,500

5,000

7,500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Thou

sand

s of

Squ

are

Feet

Vaca

ncy

Rate



DFW 3.6% 3.8%

Texas 2.2% 4.4%

U.S. 4.5% 4.1%


# of Jobs Added

DFW 3.3% 115.8k

Texas 2.2% 268.1k

U.S. 1.6% 2,264k



$20

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$23

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$25

$26

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$30

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2009 2011 2013 2015 2017

Class A Vacancy Rate Class A Rental Rate

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014,534,4232Q 7102 4,386 14.7% 0.7% 49,869,087 15.4% 15.2% 1,930,198 3,425,216 11,061,400509,727 $ 25.13

848,961,3231Q 7102 4,369 14.5% 0.7% 49,162,484 15.2% 15.1% 1,420,471 2,172,854 11,442,3591,420,471 $ 24.81

499,699,0234Q 6102 4,351 14.4% 0.6% 48,410,101 15.1% 15.0% 3,642,071 5,178,027 12,641,798421,007 $ 24.41

795,121,0233Q 6102 4,335 14.3% 0.6% 47,955,711 15.0% 15.2% 3,221,064 4,302,630 12,449,8832,069,891 $ 24.19

925,645,8132Q 6102 4,310 14.7% 0.6% 48,450,534 15.2% 15.2% 1,151,173 2,727,562 12,685,317777,460 $ 23.90

355,513,2132Q 5102 4,242 14.1% 0.7% 46,051,749 14.7% 15.1% 3,969,435 3,882,221 7,515,7161,850,468 $ 22.31

797,316,6032Q 4102 4,170 15.0% 0.7% 48,264,403 15.7% 15.7% 2,672,628 1,954,586 6,706,220880,647 $ 21.14

513,291,3032Q 3102 650,454,3156,119411,183%4.61%6.61426,291,05%7.0%8.51321,4 (43,232) $ 20.20

736,594,1032Q 2102 4,092 16.3% 0.5% 50,699,959 16.8% 16.8% 579,941 528,055 2,287,839159,086 $ 19.69


5,984,61117 12.5% 1.1% 812,489 13.6% 14.6% 64,918 0 280,48961,114 $29.79Fort Worth CBD

114,271,547500 14.6% 1.1% 17,921,875 15.7% 15.5% 1,749,964 2,465,370 9,403,022395,988 $29.69Dallas Suburban

4,833,16428 15.9% 0.9% 814,795 16.9% 13.4% (40,772) 160,182 98,497(167,524) $24.62Fort Worth Suburban

148,249,125572 16.2% 1.0% 25,482,140 17.2% 17.1% 1,912,744 2,717,789 10,043,408435,074 $28.99Total DFW Market


3,968,11642 8.3% 0.3% 341,682 8.6% 8.6% 22,819 0 0(2,405) $19.96Fort Worth CBD

124,083,0332,316 13.9% 0.5% 17,881,033 14.4% 14.2% (156,599) 662,487 914,030173,794 $20.96Dallas Suburban


148,239,1222,721 14.2% 0.5% 21,787,490 14.7% 14.5% (186,707) 707,427 1,017,99240,434 $21.05Total DFW Market


665,55421 0.2% 0.0% 1,320 0.2% 0.6% (1,320) 0 02,422 $18.82Fort Worth CBD

19,528,593816 10.1% 0.1% 1,975,827 10.1% 10.3% 161,120 0 044,321 $18.00Dallas Suburban

4,602,184211 6.7% 0.0% 307,284 6.7% 7.1% 73,669 0 018,792 $18.45Fort Worth Suburban

27,947,1631,093 9.3% 0.0% 2,599,457 9.3% 9.4% 204,161 0 034,219 $18.06Total DFW Market

All Classes32,396,952109 22.4% 0.6% 7,450,308 23.0% 22.6% 37,186 92,237 261,400(63,945) $26.58Dallas CBD

10,618,28180 10.2% 0.7% 1,155,491 10.9% 11.5% 86,417 0 280,48961,131 $26.43Fort Worth CBD

257,883,1733,632 13.9% 0.7% 37,778,735 14.6% 14.5% 1,754,485 3,127,857 10,317,052614,103 $25.09Dallas Suburban

23,419,810564 14.1% 0.6% 3,437,529 14.7% 14.3% 47,449 205,122 202,459(96,980) $21.70Fort Worth Suburban

324,435,4104,386 14.7% 0.7% 49,869,087 15.4% 15.2% 1,930,198 3,425,216 11,061,400509,727 $25.13Total DFW Market

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT





Class A

244,450,7yawsserpxE lartneC 00634,23%7.21%0.31270,719%1.0%9.2122 (20,905) $ 28.51

308,951,32DBC sallaD 004,162732,29436,831%0.62%6.52189,239,5%8.0%9.4272 145,496 $ 27.27

658,895sallaD tsaE 028,49200%4.6%4.6490,83%2.0%1.63 0 $ 42.90

622,062,33sallaD htroN raF 158 11.0% 1.3% 4,093,863 12.3% 13.4% 1,111,972 1,290,265 5,828,589708,498 $ 32.21

116,489,5DBC htroW troF 984,0820819,46%6.41%6.31984,218%1.1%5.2171 61,114 $ 29.79

585,606,91saniloC saL 81 13.1% 2.0% 2,956,316 15.1% 14.1% 722,383 544,183 812,219(198,065) $ 29.85

144,486,01yaweerF JBL 00)770,31(%4.42%7.42480,736,2%9.1%8.2273 (25,605) $ 25.63

557,474notneD / ellivsiweL 000%8.3%7.2206,21%0.0%7.26 5,243 $ 25.49

325,332,8seitiC-diM 42 20.7% 0.2% 1,718,156 20.9% 15.0% (337,033) 367,922 548,840(314,396) $ 26.61

117,527htroW troF htroN 00028,5%6.2%6.2602,91%0.0%6.23 9 $ 19.71

958,414htroW troF tsaehtroN 00680,82%3.16%7.47139,903%0.0%7.472 (55,637) $ 21.28

726,881,4retneC notserP 385,1710)617,76(%1.8%2.9692,483%7.0%4.822 (44,641) $ 39.19

North US 75 Corridor 14,116,831 144,3740)852,96(%3.32%6.22531,881,3%3.0%2.2266 96,363 $ 27.65

495,296,3htroW troF htuoS 794,89281,061)876,47(%1.01%2.31856,584%2.1%9.1132 (111,896) $ 30.28

706,253sallaD tsewhtuoS 00638,1%4.4%9.3466,31%0.0%9.33 1,836 $ 25.34



521,942,841tekraM WFD latoT 572 16.2% 1.0% 25,482,140 17.2% 17.1% 1,912,744 2,717,789 10,043,408435,074 $ 28.99

Class B

815,269,5yawsserpxE lartneC 00)790,63(%3.9%5.8956,505%4.0%1.858 47,599 $ 24.96

713,680,6DBC sallaD 00)041,27(%8.61%8.91103,202,1%6.0%2.9173 (178,125) $ 22.89

587,555,6sallaD tsaE 00)228,19(%0.8%0.8705,625%1.0%0.8871 (2,928) $ 19.51

353,082,12sallaD htroN raF 126,681496,301)878,12(%0.51%0.51121,002,3%6.0%5.41404 5,689 $ 22.75

611,869,3DBC htroW troF 00918,22%6.8%6.8286,143%3.0%3.824 (2,405) $ 19.96

062,644,81saniloC saL 314,13953,933754,52%2.31%6.41701,196,2%3.0%3.41232 47,257 $ 20.88

763,459,01yaweerF JBL 00)974,72(%3.02%0.02178,591,2%4.0%7.91821 27,138 $ 18.73

306,410,8notneD / ellivsiweL 066,821004,92)572,49(%6.9%4.01105,138%7.1%7.8591 (53,924) $ 22.18

340,216,81seitiC-diM 946,541000,01235,78%2.41%4.31153,105,2%3.0%1.31864 151,372 $ 20.28

642,032,3htroW troF htroN 000,24049,32)175,91(%9.6%7.6848,412%8.1%8.486 8,947 $ 24.08

Northeast Fort Worth 3,067,391 00)130,51(%3.74%5.84135,884,1%5.0%0.8415 (37,322) $ 18.74

758,279retneC notserP 00966,2%1.01%5.9122,29%3.0%2.912 5,673 $ 31.89


528,686,7htroW troF htuoS 269,16000,12451,94%0.9%0.8170,216%1.0%8.7602 80,127 $ 23.32



Uptown / Turtle Creek 2,548,727 842,240)757,09(%1.11%9.41385,873%9.4%9.954 (95,848) $ 32.77

221,932,841tekraM WFD latoT 2,721 14.2% 0.5% 21,787,490 14.7% 14.5% (186,707) 707,427 1,017,99240,434 $ 21.05

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT



Class C


238,051,3DBC sallaD 00)803,92(%0.9%0.01620,513%0.0%0.0154 (31,316) $ 17.97

613,476,2sallaD tsaE 00)408,61(%2.7%8.8604,432%2.0%6.8021 (42,940) $ 15.34

191,709sallaD htroN raF 00)390,82(%6.31%0.71154,451%0.0%0.7164 (31,109) $ 16.17

455,566DBC htroW troF 00)023,1(%6.0%2.0023,1%0.0%2.012 2,422 $ 18.82

991,802,1saniloC saL 00011,63%2.8%3.6695,57%0.0%3.622 24,061 $ 17.69

297,536yaweerF JBL 00)024,3(%8.42%3.52031,161%0.0%3.5213 (3,403) $ 17.97

073,746,1notneD / ellivsiweL 00724,01%1.3%1.3837,05%0.0%1.337 584 $ 17.33

118,248,4seitiC-diM 00716,17%4.21%6.11433,365%0.0%6.11602 36,719 $ 16.22

045,815htroW troF htroN 00483,72%8.1%1.2158,01%0.0%1.282 (1,474) $ 18.71


262,183retneC notserP 00081,35%9.41%5.5619,02%0.0%5.561 35,734 $ 29.35

North US 75 Corridor 2,475,759 00)137,72(%8.5%9.6173,071%0.0%9.6401 (27,896) $ 20.98

345,290,3htroW troF htuoS 00465,25%4.7%6.6984,402%0.0%6.6541 23,116 $ 18.65

503,993,1sallaD tsewhtuoS 00297,4%7.3%8.3547,25%0.0%8.376 (500) $ 18.41


Uptown / Turtle Creek 493,494 00)051,3(%6.8%6.8983,24%0.1%6.722 0 $ 30.12

361,749,72tekraM WFD latoT 00161,402%4.9%3.9754,995,2%0.0%3.9390,1 34,219 $ 18.06

All Classes

Central Expressway 13,933,620 00977,02%8.01%5.01332,364,1%2.0%3.01451 35,747 $ 27.22

259,693,23DBC sallaD 004,162732,29681,73%6.22%0.32803,054,7%6.0%4.22901 (63,945) $ 26.58

759,828,9sallaD tsaE 028,4920)626,801(%7.7%1.8700,997%1.0%0.8103 (45,868) $ 24.42

077,744,55sallaD htroN raF 608 12.4% 1.0% 7,448,435 13.4% 14.0% 1,062,001 1,393,959 6,015,210683,078 $ 27.90

182,816,01DBC htroW troF 984,0820714,68%5.11%9.01194,551,1%7.0%2.0108 61,131 $ 26.43

440,162,93saniloC saL 335 13.4% 1.1% 5,723,019 14.6% 13.5% 783,950 883,542 843,632(126,747) $ 25.61

006,472,22yaweerF JBL 00)679,34(%4.22%4.22580,499,4%1.1%3.12691 (1,870) $ 22.13


773,886,13seitiC-diM 716 14.9% 0.2% 4,782,841 15.1% 14.1% (177,884) 377,922 694,489(126,305) $ 21.94

794,474,4htroW troF htroN 000,24049,32336,31%6.5%5.5509,442%3.1%1.499 7,482 $ 22.00


647,245,5retneC notserP 385,1710)768,11(%9.8%0.9334,794%6.0%4.895 (3,234) $ 37.42

North US 75 Corridor 36,762,265 088,797430,081)797,42(%4.61%2.61780,869,5%2.0%0.61445 118,485 $ 24.38

269,174,41htroW troF htuoS 954,061281,181040,72%9.8%0.9812,203,1%4.0%6.8473 (8,653) $ 24.30




Total DFW Market 324,435,4104,386 14.7% 0.7% 49,869,087 15.4% 15.2% 1,930,198 3,425,216 11,061,400509,727 $ 25.13

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT




Q2 2017 Top Office Lease TransactionsBUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE

2001 Ross Ave Dallas CBD 139,710 Baker Botts LLP Apr-17

2001 Ross Ave Dallas CBD 115,492 Goldman Sachs Apr-17

8616 Freeport Pky Las Colinas 54,646 Yardi Systems Jun-17

3000-3030 Waterview Pky US 75 Corridor 38,783 University of Texas at Dallas Apr-17

6080 Tennyson Pky Far North Dallas 35,738 BroadSoft, Inc. May-17

6500 International Pky Far North Dallas 33,653 Fisher Asset Jun-17

2375 N Glenville Dr US 75 Corridor 33,465 Service King Collision Repair Centers May-17

8585 N Stemmons Fwy Stemmons Freeway 30,703 Safeguard Business Systems May-17

7950 Legacy Dr Far North Dallas 25,343 NTT DATA, Inc. May-17

5080 Spectrum Dr Far North Dallas 23,427 Principal Financial Services, Inc. May-17

222 W Las Colinas Blvd Las Colinas 22,542 Lightbeam Health Solutions May-17

220 E Las Colinas Blvd Las Colinas 22,338 General Motors Financial Company Apr-17

4120 International Pky Far North Dallas 18,398 Gallagher Apr-17

5905 Legacy Dr Far North Dallas 17,315 Spectrum VIOP May-17

651 Canyon Dr Las Colinas 16,876 MAG Velocity May-17

Leasing Activity Leasing activity in Q2 2017 was down 25% from the first half of 2016. Leasing activity for Q2 was approximately 3.9 million square feet, while year-to-date activity is just over 8.3 million square feet.

Q2 2017 Significant Sales Transactions – (50,000 SF or greater)BUILDING NAME SUBMARKET RBA (SF) CLASS BUYER SELLER DATE SOLD

5851 Legacy Circle Upper Tollway/ West Plano 318,582 A TIER REIT, Inc. VEREIT, Inc. 06/26/17

Northpark Central Central Expressway 491,820 A CBRE Global Investors Cornerstone RE Advisers 06/21/17

Point West I DFW Freeport/Coppell 182,700 B Capital Commercial Investments Gramercy Property Trust 05/31/17

Midtown Office Center East LBJ Freeway 128,789 B Olymbec USA Libitzky Property Companies 05/26/17

2280 N Greenville Avenue Richardson 190,000 B Intercontinental Real Estate Corporation

Foundry Commercial, CenterSquare 05/25/17

Arbors at Brookhollow Arlington/Mansfield 114,421 B Yacht Harbor Capital Advisors Onward Investors LLC 05/19/17

Pacific Center I & II Quorum/Bent Tree 224,222 A Apex Pacific Partners KBS Real Estate Investment Trust 05/18/17

The Douglas Preston Center 163,864 B Granite Properties Transwestern Investment Company 05/02/17

Granite Plaza Office Ctr/West LBJ Extension 195,173 A American Fidelity Property

Company Granite Properties 04/27/17

Forest Green Business Park East LBJ Freeway 172,620 B Pat Davis Properties Prescott Realty Group 04/03/17

Sales Activity Investment activity for the first half of 2017 was up 74% from the first half of 2016. Liberty Mutual’s purchase of its Plano campus was one of the largest transactions of the quarter, estimated at around $325 million. 5851 Legacy Circle in Far North Dallas traded near Uptown-level prices at $387 per square foot.



Q2 2017 Significant Sales Transactions – (50,000 SF or greater)BUILDING NAME SUBMARKET RBA (SF) CLASS BUYER SELLER DATE SOLD

5851 Legacy Circle Upper Tollway/ West Plano 318,582 A TIER REIT, Inc. VEREIT, Inc. 06/26/17

Northpark Central Central Expressway 491,820 A CBRE Global Investors Cornerstone RE Advisers 06/21/17

Point West I DFW Freeport/Coppell 182,700 B Capital Commercial Investments Gramercy Property Trust 05/31/17

Midtown Office Center East LBJ Freeway 128,789 B Olymbec USA Libitzky Property Companies 05/26/17

2280 N Greenville Avenue Richardson 190,000 B Intercontinental Real Estate Corporation

Foundry Commercial, CenterSquare 05/25/17

Arbors at Brookhollow Arlington/Mansfield 114,421 B Yacht Harbor Capital Advisors Onward Investors LLC 05/19/17

Pacific Center I & II Quorum/Bent Tree 224,222 A Apex Pacific Partners KBS Real Estate Investment Trust 05/18/17

The Douglas Preston Center 163,864 B Granite Properties Transwestern Investment Company 05/02/17

Granite Plaza Office Ctr/West LBJ Extension 195,173 A American Fidelity Property

Company Granite Properties 04/27/17

Forest Green Business Park East LBJ Freeway 172,620 B Pat Davis Properties Prescott Realty Group 04/03/17

MID-CITIES 694K SF



LAS COLINAS 843K SF


TOTA

L: 1

1.5M

SF

15.4% 509,727 SFVACANCY NET ABSORPTION


Q2 2017 HIGHLIGHTS


ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

53118.8M SF

14.3%

43531.3M SF

21.2%

44969.4M SF

19.7%

13846.5M SF

21.0%

2817.8M SF22.8%

1722.9M SF

23.9%

148.2M SF148.2M SF

27.9M SF

UNDERCONSTRUCTION

SUBMARKET SF

Quoted gross rental rates for existing top performing office buildingsBUILDING NAME ADDRESS SUBMARKET RBA (SF) YEAR

BUILT%

LEASED AVAIL. SF RENT ($/SF) OWNER

+E BUILDINGS


1919 McKinney Ave 1919 McKinney Ave Uptown/Turtle Creek 118,940 1924 69% 40,788 $38.00 +E Ecom Real Estate Mgmt, Inc.

8300 Douglas at Preston Center 8300 Douglas Ave Preston Center 100,893 1982 37% 63,492 $35.50 +E Lionstone Investments


Travis Walk 4514 Travis St Preston Center 91,357 1986 90% 17,703 $35.00 +E Intercity Investment Properties, Inc.

3100 Monticello 3100 Monticello Ave Preston Center 174,879 1983 95% 33,194 $35.00 +E Westdale Real Estate Investment and Management

NNN BUILDINGS

2100 McKinney Ave 2100 McKinney Ave Uptown/Turtle Creek 360,859 1998 96% 16,161 $40.00 NNN NY State Common Retirement Fund

17Seventeen McKinney 1717 McKinney Ave Uptown/Turtle Creek 369,017 2010 97% 41,860 $39.00 NNN Gaedeke Group LLC


2000 McKinney Ave 2000 McKinney Ave Uptown/Turtle Creek 447,595 2008 97% 20,803 $38.50 NNN Union Investment Real Estate GmbH


Harwood No. 7 Frost Tower 2950 N Harwood St Uptown/Turtle Creek 167,735 2015 94% 9,702 $38.00 NNN Harwood International







RESEARCHERS:



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20

30

30

308080

820

820

820

DNT

DNT

LLT

LLT

45

45

75

75

1709

12

12

12

12

12

12

12

635

635

408

161

161

161

114

121

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121

1212499

303

352

190

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78

66

205

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360

377

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377

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199

287

287

287B

287B

35

35E

35W

35E

35W

35E

35W

35E35W

30

30

35W

67

67

377

288

114

20

20635

20

20

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81

175

26

20820

20

175

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DNT

DNT

380

114

183

DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTER

WINGREN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

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10



2 1132.4m SF 23% Vac UC = 261.4K SF $ 26.58 PSF 4.5m SF 42.3% Vac UC = None $ 19.20 PSF









Total Market

154 Bldgs

109 Bldgs

301 Bldgs

608 Bldgs

80 Bldgs

335 Bldgs

196 Bldgs

274 Bldgs

99 Bldgs

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

91 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

Stemmons Freeway


716 Bldgs

59 Bldgs

544 Bldgs

374 Bldgs

158 Bldgs

175 Bldgs

113 Bldgs

4,386 Bldgs

Solid start clouded by rising construction costs




2017 promises to be a big year for Dallas-Fort Worth Real Estate – or more specifically Plano real estate. If everything remains on schedule, the long-anticipated Legacy West development will welcome Toyota’s North American Headquarters, JP Morgan Chase, and Liberty Mutual by the end of the year. More companies such as Ryan, LLC and Boeing have also announced moves to the area.

The northern suburbs are not the only area with development news. At the beginning of the year, AT&T announced plans to invest $100 million into their campus headquarters, efforts that could help rejuvenate the southern part of downtown Dallas, where average rates lag the Arts District north of San Jacinto by more than $10/psf. Although not expected to be completed until 2019, the project could encourage other downtown owners to reinvest in anticipation.

Rising construction costs continue to be a concern for the DFW market, as well as in other markets across the country. TI dollars are increasing as landlords try to lessen the shock to tenants from the dramatic increase in build-out costs. Increases in construction costs (and land costs in hot markets) may also have put the breaks on some speculative office developments, as investors are finding that the pro forma rates needed to achieve their target returns are not feasible. This has not stopped investors from announcing potential opportunities for whale tenants circling the market to anchor a major new development – Hillwood, KDC, Rosewood, Bright Realty, and more have proposed projects in need of a large tenant to kick off.

A Look Ahead> Construction costs will continue to rise as there is no end in sight

for the labor shortage. Increasing construction costs will continue to push rates for new product higher. DFW continues to be a relative bargain compared to gateway cities, and the upward push in overall rates is likely to level off by the end of 2017.

> Vacancy will rise slightly in the next few quarters as DFW delivers new spec construction and as tenants move into Legacy West and consolidate from locations across the metroplex. Continued interest from companies looking to relocate in DFW will mitigate the rise.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 15.4% 17.2% 14.8%






Average $24.88 $28.74 $20.83




AnnualChange

Quarterly Change

Quarterly Forecast*

Vacancy

Net Absorption

Under Construction

Rental Rate

*Projected


Market Highlights> DFW added 125,000 jobs, an increase of 3.6% from February 2016 to 2017, while

Texas grew at 1.9% and the U.S. grew at 1.7% over the same period. The DFW unemployment rate has ticked up slightly, increasing 0.6% year-over-year to 4.3%, but remains below the national average of 4.9%.

> Speculative construction continues to be about half of all properties under construction. Properties delivered in Q1 2017 that were not build-to-suits were 34.5% pre-leased as of the end of the quarter, down significantly from 73.7% pre-leased for those delivered in Q4 2016. Construction starts held steady in Q1 2017, with 16 properties totaling 900,000 square feet breaking ground.

Vacancy RateVacancy rose slightly from 15.2% in Q4 2016 to 15.4% in Q1 2016. The vacancy rate has held relatively steady throughout 2016 and into the first quarter of 2017. Class A vacancy increased 0.1% to 17.2%, and Class B vacancy increased 0.4% to 14.8%.

South Fort Worth saw the greatest increase in Class A vacancy from Q4 2016 to Q1 2017, with vacancy jumping 3% to 10.1% when it delivered two buildings in the speculative Clearfork development. Vacancy in Las Colinas improved by 1.2%, reaching 13.5% overall, due to McKesson’s move-in to 527,000 square feet at the Apex at Las Colinas Crossing. Dallas CBD vacancy increased by 0.4%, while Uptown/Turtle Creek vacancy remained flat at 10.7%.

Rental RatesOverall rental rates continued to set new records in Q1 2017, rising $0.44 from Q4 2016 to $24.88 for gross asking rents. For Class A, rental rates increased 1.4% to $28.74, and Class B rates rose 2% to $20.83 overall.

Class A gross asking rental rates in Uptown/Turtle Creek were flat from the prior quarter at $40.47. After topping $40 in Q3 2016, rates have held steady, decreasing only 0.12% from that quarter, signaling that rates might have reached their peak.

The LBJ Freeway submarket saw a significant increase in rental rates both for Class A, which increased 1.8% to $25.82, and Class B, which increased 5.2% to $18.67. While the market still has significant vacancy, the increase in asking rates shows the market is affected by rental rate lift in adjacent markets such as Central Expressway and Preston Center.

Absorption & Demand Net absorption for Q1 2017 was 1.2 million square feet, almost three times the amount of net absorption that was recorded in Q4 2016. Anticipated major move-ins will likely cause 2017’s absorption level to exceed 2016’s significantly.

Las Colinas led the market, absorbing over 920,000 square feet in Q1 2017, including Corelogic occupying its 327,000 square foot headquarters. Far North Dallas absorbed 485,000 square feet, with the largest impacts from Capital One’s move into their seventh building in Plano and Legacy West’s first tenants moving into 161,000 square feet. The North US 75 corridor saw the highest level of negative absorption at 140,000 square feet, the largest move-out being Frontier Communication’s vacating 138,000 square feet at The Tower at Lakeside Campus.

0%

5%

10%

15%

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25%

0

2,500

5,000

7,500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Thou

sand

of S

quar

e Fe

et

Vaca

ncy

Rate



DFW 3.7% 4.3%

Texas 4.4% 5.1%

U.S. 5.2% 4.9%


# of Jobs Added

DFW 3.6% 124.5k

Texas 1.9% 226.2k

U.S. 1.7% 2,360k



$20

$21

$22

$23

$24

$25

$26

$27

$28

$29

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15%

16%

17%

18%

19%

2009 2011 2013 2015 2017


-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2013 2014 2015 2016 2017

Thou

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s of

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are

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New Supply, Absorption & Vacancy Rate 0%

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10%

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20%

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Thou

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EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT



573,934,3231Q 7102 4,357 14.7% 0.7% 49,811,724 15.4% 15.2% 1,223,865 2,295,144 11,541,9651,223,865 $ 24.88

132,972,1234Q 6102 4,340 14.6% 0.6% 48,875,445 15.2% 15.1% 3,152,612 5,036,371 12,937,242416,732 $ 24.44

945,504,0233Q 6102 4,324 14.5% 0.6% 48,418,495 15.1% 15.4% 2,735,880 4,297,689 12,772,2822,101,414 $ 24.21

908,038,8132Q 6102 4,299 14.8% 0.6% 48,945,169 15.4% 15.2% 634,466 2,722,949 12,792,880260,155 $ 23.93

484,918,7131Q 6102 4,285 14.6% 0.6% 48,193,999 15.2% 14.8% 374,311 1,711,624 10,406,068374,311 $ 23.79

593,977,1131Q 5102 4,222 14.4% 0.7% 47,133,141 15.1% 15.0% 2,125,607 3,022,545 6,373,1512,125,607 $ 22.01

310,517,5031Q 4102 4,147 15.0% 0.7% 47,902,412 15.7% 16.0% 1,503,372 410,088 7,615,5481,503,372 $ 21.05

876,005,3031Q 3102 4,108 15.8% 0.6% 49,787,433 16.4% 16.4% 399,997 574,300 2,621,721399,997 $ 19.76

151,055,1031Q 2102 4,078 16.3% 0.5% 50,590,169 16.8% 16.8% 409,307 290,727 1,859,634409,307 $ 19.71

Class A23,067,56626 25.0% 1.1% 6,015,547 26.1% 26.0% (24,257) 0 353,637(24,257) $26.98Dallas CBD

5,984,61117 14.2% 0.4% 870,583 14.5% 14.6% 3,804 0 280,4893,804 $29.32Fort Worth CBD

113,131,731494 14.6% 1.0% 17,695,036 15.6% 15.5% 1,381,169 1,937,370 9,909,6431,381,169 $29.45Dallas Suburban

4,828,66828 12.5% 0.9% 647,271 13.4% 13.1% 126,752 160,182 0126,752 $24.60Fort Worth Suburban

147,012,576565 16.2% 1.0% 25,228,437 17.2% 17.1% 1,487,468 2,097,552 10,543,7691,487,468 $28.74Total DFW Market


3,960,48642 8.3% 0.3% 339,277 8.6% 9.2% 25,224 0 025,224 $19.67Fort Worth CBD

124,580,0782,297 14.0% 0.5% 18,059,416 14.5% 14.1% (305,175) 152,652 950,871(305,175) $20.77Dallas Suburban

13,942,607323 15.9% 0.9% 2,343,512 16.8% 16.3% (37,600) 44,940 47,325(37,600) $20.79Fort Worth Suburban

148,569,4882,699 14.3% 0.5% 21,978,607 14.8% 14.4% (423,792) 197,592 998,196(423,792) $20.83Total DFW Market


675,55422 0.6% 0.0% 3,742 0.6% 0.0% (3,742) 0 0(3,742) $19.33Fort Worth CBD

19,431,644816 10.2% 0.0% 1,996,438 10.3% 10.8% 107,046 0 0107,046 $17.78Dallas Suburban


27,857,3111,093 9.3% 0.0% 2,604,680 9.4% 9.9% 160,189 0 0160,189 $17.96Total DFW Market

All Classes32,304,715108 22.4% 0.9% 7,535,659 23.3% 22.9% (128,490) 0 353,637(128,490) $26.25Dallas CBD

10,620,65181 11.1% 0.3% 1,213,602 11.4% 11.7% 25,286 0 280,48925,286 $25.60Fort Worth CBD

257,143,4533,607 14.0% 0.7% 37,750,890 14.7% 14.5% 1,183,040 2,090,022 10,860,5141,183,040 $24.84Dallas Suburban


323,439,3754,357 14.7% 0.7% 49,811,724 15.4% 15.2% 1,223,865 2,295,144 11,541,9651,223,865 $24.88Total DFW Market



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A


665,760,32DBC sallaD 736,3530)752,42(%0.62%1.62745,510,6%1.1%0.5262 (24,257) $ 26.98

064,041sallaD tsaE 754,19200%1.01%1.01571,41%0.1%1.92 0 $ NA

326,866,23sallaD htroN raF 156 11.9% 1.4% 4,336,149 13.3% 12.4% 509,360 890,265 6,270,597509,360 $ 31.99

116,489,5DBC htroW troF 984,0820408,3%6.41%5.41385,078%4.0%2.4171 3,804 $ 29.32

404,116,91saniloC saL 81 12.7% 1.3% 2,746,584 14.0% 16.4% 932,382 679,183 621,219932,382 $ 28.36

007,186,01yaweerF JBL 00825,21%0.52%9.42706,456,2%4.1%4.3273 12,528 $ 25.82

557,474notneD / ellivsiweL 00)342,5(%7.6%8.3548,71%0.0%8.36 (5,243) $ 25.43

325,330,8seitiC-diM 048,847229,761)736,22(%9.21%0.51067,302,1%3.1%7.3114 (22,637) $ 26.34

117,527htroW troF htroN 00118,5%0.0%6.2512,91%0.0%6.23 5,811 $ 19.29


726,881,4retneC notserP 385,1710)570,32(%6.7%1.8556,933%6.0%5.722 (23,075) $ 38.88

North US 75 Corridor 14,464,90766 22.1% 0.5% 3,277,515 22.7% 21.5% (165,621) 0 469,417(165,621) $ 27.79

890,886,3htroW troF htuoS 0281,061812,73%1.7%1.01267,373%2.1%9.832 37,218 $ 30.17


950,375,4yaweerF snommetS 000,360)086,88(%6.02%5.22229,030,1%2.0%3.2231 (88,680) $ 16.11


675,210,741tekraM WFD latoT 565 16.2% 1.0% 25,228,437 17.2% 17.1% 1,487,468 2,097,552 10,543,7691,487,468 $ 28.74

Class B


713,680,6DBC sallaD 37 19.8% 0.6% 1,236,402 20.3% 18.6% (106,241) 0 0(106,241) $ 22.31

814,499,6sallaD tsaE 00)447,69(%6.21%0.41727,089%1.0%9.31081 (96,744) $ 18.67

267,002,12sallaD htroN raF 843,931433,17)405,62(%6.41%0.51000,181,3%6.0%4.41793 (26,504) $ 22.44

684,069,3DBC htroW troF 00422,52%2.9%6.8772,933%3.0%3.824 25,224 $ 19.67

267,942,81saniloC saL 953,9530)007,12(%2.31%3.31154,034,2%4.0%9.21232 (21,700) $ 21.00

884,759,01yaweerF JBL 00)716,45(%8.91%3.02900,322,2%6.0%7.91821 (54,617) $ 18.67


278,460,91seitiC-diM 000,880)297,85(%5.31%9.31806,046,2%3.0%5.31464 (58,792) $ 20.23

921,032,3htroW troF htroN 000,01049,32)815,82(%3.5%9.6597,322%9.1%0.586 (28,518) $ 23.02


758,279retneC notserP 00)400,3(%8.9%1.01498,79%3.0%8.912 (3,004) $ 30.45


152,656,7htroW troF htuoS 523,73000,12)373,13(%1.8%8.8987,376%5.0%3.8502 (31,373) $ 22.85



Uptown / Turtle Creek 2,523,265 00325,8%3.11%0.11757,672%7.0%3.0144 8,523 $ 32.56

Total DFW Market 148,569,4882,699 14.3% 0.5% 21,978,607 14.8% 14.4% (423,792) 197,592 998,196(423,792) $ 20.83



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class C


238,051,3DBC sallaD 00800,2%1.9%0.9017,382%0.0%0.954 2,008 $ 18.96

613,476,2sallaD tsaE 00631,62%1.8%2.7664,191%0.0%2.7021 26,136 $ 15.12

183,258sallaD htroN raF 00554,2%4.31%1.31409,111%0.0%1.3154 2,455 $ 17.32

455,576DBC htroW troF 00)247,3(%0.0%6.0247,3%0.0%6.022 (3,742) $ 19.33

991,802,1saniloC saL 00940,21%2.9%2.8756,99%0.0%2.822 12,049 $ 17.11

297,526yaweerF JBL 00)71(%1.42%1.42727,051%0.0%1.4203 (17) $ 18.52

642,746,1notneD / ellivsiweL 00348,9%7.3%1.3223,15%0.0%1.337 9,843 $ 17.20

393,028,4seitiC-diM 00898,43%2.31%4.21350,006%0.0%4.21702 34,898 $ 15.62

045,815htroW troF htroN 00858,82%4.7%8.1773,9%0.0%8.182 28,858 $ 18.21


262,183retneC notserP 00644,71%4.91%9.41056,65%0.0%9.4161 17,446 $ 29.33

North US 75 Corridor 2,460,688 00561%8.5%8.5574,241%0.0%8.5401 165 $ 20.31

046,980,3htroW troF htuoS 00844,92%1.8%2.7913,222%0.0%2.7441 29,448 $ 18.83



Uptown / Turtle Creek 503,457 00)285,6(%3.8%6.9763,84%4.1%2.832 (6,582) $ 30.27

113,758,72tekraM WFD latoT 00981,061%9.9%4.9086,406,2%0.0%3.9390,1 160,189 $ 17.96

All Classes


517,403,23DBC sallaD 108 22.4% 0.9% 7,535,659 23.3% 22.9% (128,490) 0 353,637(128,490) $ 26.25

491,908,9sallaD tsaE 754,1920)806,07(%4.11%1.21863,681,1%1.0%0.21203 (70,608) $ 18.38

667,127,45sallaD htroN raF 549,904,6995,169113,584%3.31%9.31350,926,7%0.1%9.21895 485,311 $ 27.94

156,026,01DBC htroW troF 984,0820682,52%7.11%4.11206,312,1%3.0%1.1118 25,286 $ 25.60

563,960,93saniloC saL 875,089381,976137,229%7.41%5.31296,672,5%9.0%7.21533 922,731 $ 24.50

089,462,22yaweerF JBL 00)601,24(%4.22%6.22343,820,5%0.1%6.12591 (42,106) $ 22.20


887,819,13seitiC-diM 048,638229,761)135,64(%3.31%9.31124,444,4%5.0%4.31217 (46,531) $ 21.89

083,474,4htroW troF htroN 000,01049,32151,6%3.5%6.5783,252%4.1%3.499 6,151 $ 21.06


647,245,5retneC notserP 385,1710)336,8(%8.8%9.8991,494%5.0%4.895 (8,633) $ 36.99


989,334,41htroW troF htuoS 523,73281,181392,53%9.7%8.8078,962,1%6.0%2.8273 35,293 $ 24.00


Stemmons Freeway 14,183,310174 24.0% 0.6% 3,480,712 24.5% 23.8% (104,718) 0 63,000(104,718) $ 15.92


Total DFW Market 323,439,3754,357 14.7% 0.7% 49,811,724 15.4% 15.2% 1,223,865 2,295,144 11,541,9651,223,865 $ 24.88





3000 Olympus Blvd Las Colinas 216,400 Brinker International Feb-17

7950 Legacy Dr Far North Dallas 126,715 NTT DATA, Inc. Jan-17

13155 Noel Rd LBJ Freeway 88,084 Amazon Mar-17

2300 N Field St Uptown/Turtle Creek 68,000 Akin Gump Strauss Hauer & Feld LLP Mar-17

2375 N Glenville Dr US 75 Corridor 64,916 Service King Collision Repair Centers Jan-17

3000 N Redbud Blvd US 75 Corridor 52,611 Southwest Airlines Mar-17

5445 Legacy Dr Far North Dallas 36,000 Wipro Technologies Jan-17

5010 Riverside Las Colinas 35,962 Nielson Feb-17

4500 Fuller Dr Las Colinas 35,164 GSA Feb-17

5700 Democracy Dr Far North Dallas 32,704 Toyota Jan-17

5201 Tennyson Pky Far North Dallas 31,243 Macquarie Infrastructure Corporation Jan-17

13355 Noel Rd LBJ Freeway 30,530 AECOM Mar-17

7250 N Dallas Pky Far North Dallas 28,233 Creston Electronics Jan-17

1717 Main St Dallas CBD 25,920 HighGround Advisors Mar-17

4025 Woodland Park Blvd Mid Cities 25,599 Henry Schein, Inc. Feb-17

Leasing Activity

Leasing Activity for Q1 2017 totaled approximately 3.3 million square feet, which is behind the quarterly average in 2016. Average deal size continued to hover around 4,000 square feet.

Q1 2017 Significant Sales Transactions – (50,000 SF or greater)BUILDING NAME SUBMARKET RBA (SF) YEAR BUILT BUYER SELLER DATE SOLD

2525 McKinnon Uptown/Turtle Creek 111,742 2003 City Office REIT, Inc. Talon Private Capital 1/11/2017

Parkside Tower Uptown/Turtle Creek 378,088 1985 Lincoln Property Company Building & Land Technology 3/1/2017

Western Place I & II South Ft Worth 425,040 1978,1981 TCRG Properties, LLC. TLC Urban 2/1/2017

Centreport Grand Prairie 60,037 1998 Capital Commercial Investments, Inc. AT&T, Inc. 2/22/2017

University Centre* Richardson 59,792 1980 Symphony Gateway LLC and CIG Retail Properties Pat Davis Properties 3/30/2017

2250 W John Carpenter Las Colinas 127,226 1998 Exeter Property Group CBRE Global Investors 3/24/2017

Banner Place North and South* LBJ Freeway 258,493 1984 JP Realty Partners Gaedeke Group LLC 3/7/2017

Meadow Central* Central Expressway 106,210 1978 Ascent Real Estate Advisors Sunwest Real Estate Group 3/2/2017

Old Raytheon Campus East Dallas 449,298 1980 Langford Property Co. IRC Retail Centers 2/15/2017

Sales Activity

As is common in the first quarter, investment activity was down significantly in Q1 2017 from the last few quarters of 2016, but up 14.6% year-over-year. The LBJ submarket saw three sales of properties over 100,000 square feet, and Uptown/Turtle Creek had two large office transactions.

*Colliers transactionSources: RCA, Costar, Colliers Research



MID-CITIES 837K SF

LAS COLINAS 981K SF



TOTA

L: 1

1.5M

SF

15.4% 1.2M SFVACANCY NET ABSORPTION


Q1 2017 HIGHLIGHTS


ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

53018.8M SF

15.1%

43731.3M SF20.8%

45169.7M SF

19.6%

13746.2M SF

21.7%

2817.8M SF22.2%

1722.9M SF

23.9%

147.0M SF148.6M SF

27.9M SF

UNDERCONSTRUCTION

SUBMARKET SF


BUILT%


+E BUILDINGS



8300 Douglas at Preston Ctr. 8300 Douglas Ave Preston Center 100,893 1982 38% 62,338 $35.50 +E Lionstone Investments


3100 Monticello 3100 Monticello Ave Preston Center 174,879 1983 98% 35,772 $34.85 +E Westdale Real Estate

The Urban Towers 222 W Las Colinas Blvd Las Colinas 848,939 1983 93% 249,635 $34.50 +E Parallel Capital Partners, Inc.

NNN BUILDINGS

2100 McKinney 2100 McKinney Ave Uptown/Turtle Creek 360,859 1998 96% 33,296 $40.00 NNN New York State Common Retirement Fund




Saint Ann Court 2501 N Harwood St Uptown/Turtle Creek 314,279 2009 96% 25,973 $34.00 NNN Harwood International








RESEARCHERS:



77

20

30

30

308080

820

820

820

DNT

DNT

LLT

LLT

45

45

75

75

1709

12

12

12

12

12

12

12

635

635

408

161

161

161

114

121

121

121

121

1212499

303

352

190

190

190

78

78

66

205

183

183

183

183

67

67

67

360

377

377

377

380

380

380

199

287

287

287B

287B

35

35E

35W

35E

35W

35E

35W

35E35W

30

30

35W

67

67

377

288

114

20

20635

20

20

20

287

81

175

26

20820

20

175

30

DNT

DNT

380

114

183

DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTER

WINGREN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10


1 1014m SF 10.7% Vac UC = None $ 27.28 PSF 4.5m SF 5.6% Vac UC = 10K SF $ 21.06 PSF










Stemmons Freeway


712 Bldgs

59 Bldgs

535 Bldgs

372 Bldgs

157 Bldgs

174 Bldgs

112 Bldgs

4,357 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

90 Bldgs

Total Market

156 Bldgs

108 Bldgs

302 Bldgs

598 Bldgs

81 Bldgs

335 Bldgs

195 Bldgs

272 Bldgs

99 Bldgs

Sales surge, rates rise, but absorption eases to close 2016



Mike Otillio Director of Market ResearchKari Beets Research Associate

The fourth quarter of 2016 wrapped up a strong year for the Dallas-Fort Worth real estate market in terms of office sale activity, but moderate in terms of leasing.

After seeing over 6.4 million square feet of absorption in 2015, the highest in almost a decade - absorption slowed considerably in 2016, totaling just over 3 million square feet – less than half of the prior two years. (Gross absorption, the measure of total square feet leased and occupied not accounting for space vacated in the same market was higher than the prior year, indicating more space was vacated even though activity was strong.) Two factors may account for this: fewer deals coming from outside the DFW market and consolidation of tenants already present. Consolidation has been a theme as major companies move dispersed locations into newer offices and firms modernize their space, reducing the square footage per employee.

The year saw record prices for office sales. Sale prices in the Uptown submarket for 17Seventeen McKinney and 2000 McKinney both topped $500/sf – the highest seen for urban Class A office, and Legacy Tower fetched $400/sf – the highest ever for suburban office. 2016 was also the year of the sale-leaseback with State Farm completing the sale-leaseback of its CityLine operations center for $822 million, JCPenney selling its Legacy West headquarters for $353 million, and Verizon selling its regional headquarters for $344 million. With record-high sale prices, companies, such as Raytheon whose CityLine campus recently went on the market, are seeking to cash-in their valuable real estate assets.

A Look Ahead> Net absorption in 2017 should significantly outpace 2016 due to

major move-ins including Toyota’s North American Headquarters, Liberty Mutual, TD Ameritrade, and McKesson. Toyota’s headquarters alone will account for 2 million square feet of absorption. Expect net absorption to exceed 2015’s level of 6 million square feet.

> Average asking rates will level off toward the end of 2017 as the vacancy rate ticks higher and more product is delivered. Hard-hit markets such as Dallas CBD, LBJ Freeway, and Stemmons Freeway, which have vacancy rates close to or above 20%, will see falling rates and landlords investing in building improvements.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 15.5% 16.5% 15.5%






Average $24.55 $28.44 $20.84




AnnualChange

Quarterly Change

Quarterly Forecast*

Vacancy

Net Absorption

Under Construction

Rental Rate

*Projected


Market Highlights> Although absorption was down, job growth remains steady in the Dallas-Fort Worth

area and continues to outpace job growth in Texas and the nation. From November 2015 to November 2016, DFW added 114,800 jobs, a growth rate of 3.3%, outpacing Texas which grew at 1.8% and the U.S. which grew at 1.6% over the same time period.

> Of the 5 million square feet delivered in 2016, approximately 30% was build-to-suit and 70% was speculative or only partially pre-leased. Spec multitenant buildings delivered in 2016 were 67% leased as of the end of the year.

Vacancy RateThe vacancy rate was flat at 15.5% from Q3 to Q4 and has held relatively steady throughout 2016. Year-over-year vacancy increased 0.4% from 15.1%. Class A vacancy decreased 0.2% to 16.5% in Q4 and Class B vacancy increased 0.1% to 15.5%.

Vacancy continued to rise in the Dallas CBD, increasing 0.4% to 23.8% overall, and 26.8% for Class A. Uptown/Turtle Creek saw a 1.4% drop in vacancy to 10.7% as tenants moved into space at McKinney & Olive. The North US 75 Corridor saw a 2% increase in Class A vacancy after Verizon moved its campus at 2400 Glenville.

Rental RatesRates continued their climb in Q4, increasing 0.9% from Q3 to $24.55 overall. For Class A, rates grew 0.6% to $28.44 gross, and Class B rates rose to $28.84 in Q4 from $20.61 in the prior quarter.

After Class A rates topped $40 on average for the first time in Uptown/Turtle Creek, rates for that submarket held at $40.61 from Q3 to Q4. Preston Center’s Class A rates jumped $0.64 from Q3 to Q4, an increase of 1.7%. New Class A buildings are pushing rates higher as investors seek to recoup climbing construction costs and tenants seek amenities to attract a strong workforce.

While rates at the top are making headlines, there are still relative bargains in the premium markets for tenants who seek a premium location but are willing to office in an older building. Class A asking rates range from $19.75-40.00 triple net in Uptown/ Turtle Creek. Rates for Preston Center Class A spaces show a smaller range from $23 to $34.50 triple net.

Absorption & Demand Overall net absorption for 2016 was 3,060,573 square feet, less than half of 2015’s absorption rate of 6,403,606 square feet. As job growth was still consistent, much of the lack of absorption could be attributed to tenants reducing the space per employee and using square footage more efficiently. Absorption will pick up considerably in 2017 as large projects in North Dallas are delivered; however, Dallas CBD will continue to see little to no absorption.

Las Colinas showed the highest level of absorption in Q4 with a total of 368,508 square feet bolstered by OneSource Virtual’s move into their 215,000 square foot headquarters. Northeast Fort Worth had the greatest negative absorption after Bank of America consolidated and moved from 431,579 square feet at 5401 N Beach Street.

0%

5%

10%

15%

20%

25%

0

2,500,000

5,000,000

7,500,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Squa

re F

eet

Vaca

ncy

Rate



DFW 3.9% 3.5%

Texas 4.4% 4.2%

U.S. 4.8% 4.7%


# of Jobs Added

DFW 3.3% 114.8K

Texas 1.8% 210.8K

U.S. 1.6% 2,231.0K




$20

$21

$22

$23

$24

$25

$26

$27

$28

$29

14%

15%

16%

17%

18%

19%

2008 2010 2012 2014 2016


-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2012 2013 2014 2015 2016






9134Q 6102 ,920,1004,323 14.8% 0.7% 49,528,953 15.5% 15.5% 3,060,573 5,067,429 11,523,510630,623 $ 24.55

9133Q 6102 ,168,6034,308 14.8% 0.6% 49,408,079 15.5% 15.6% 2,429,950 4,315,932 11,606,0551,737,740 $ 24.32

7132Q 6102 ,575,4014,282 15.0% 0.6% 49,552,617 15.6% 15.4% 692,210 2,722,730 11,363,968268,067 $ 24.03

6131Q 6102 ,564,0764,268 14.8% 0.6% 48,809,359 15.4% 15.1% 424,143 1,711,405 10,388,433424,143 $ 23.90

4134Q 5102 ,852,6714,246 14.5% 0.5% 47,522,097 15.1% 15.1% 6,403,606 6,854,489 9,411,5651,224,259 $ 23.52

7034Q 4102 ,998,1824,183 14.6% 0.7% 47,071,214 15.3% 15.4% 6,094,143 3,722,431 7,980,9871,277,401 $ 21.91

4034Q 3102 ,275,7514,121 15.7% 0.6% 49,442,926 16.2% 16.2% 2,528,377 2,353,566 6,306,934269,363 $ 20.53

1034Q 2102 ,922,1854,084 15.9% 0.5% 49,617,737 16.4% 16.5% 2,756,316 1,678,430 2,279,336490,001 $ 19.68

Class A23,067,56626 25.6% 1.3% 6,183,925 26.8% 26.4% (709,937) 92,834 353,637(32,060) $26.97Dallas CBD

5,984,61117 14.2% 0.4% 874,387 14.6% 14.5% (105,449) 0 280,489(4,878) $29.21Fort Worth CBD

109,554,958477 13.3% 1.1% 15,860,536 14.5% 14.8% 3,266,315 3,427,998 9,930,664598,706 $29.00Dallas Suburban


143,055,376545 15.4% 1.1% 23,532,689 16.5% 16.7% 2,656,120 3,783,462 10,724,972605,979 $28.44Total DFW Market

Class B6,075,67837 20.0% 0.0% 1,216,116 20.0% 20.7% 108,791 0 039,041 $22.75Dallas CBD

3,959,78642 8.9% 0.3% 364,501 9.2% 9.0% (79,466) 0 0(6,303) $19.60Fort Worth CBD

125,045,8962,287 14.6% 0.4% 18,744,716 15.0% 15.2% 838,994 1,114,990 726,546571,356 $20.74Dallas Suburban


149,547,6362,685 15.1% 0.4% 23,150,722 15.5% 15.4% 592,803 1,283,967 798,538161,253 $20.84Total DFW Market

Class C3,155,83245 9.1% 0.0% 288,438 9.1% 9.2% (12,505) 0 02,506 $18.11Dallas CBD

675,55422 0.0% 0.0% 0 0.0% 0.0% 8,278 0 00 $21.29Fort Worth CBD

18,883,458815 11.4% 0.0% 2,161,962 11.4% 10.9% (86,574) 0 0(100,706) $16.25Dallas Suburban


27,317,0881,093 10.4% 0.0% 2,845,542 10.4% 9.9% (188,350) 0 0(136,609) $16.73Total DFW Market

All Classes32,299,076108 22.9% 0.9% 7,688,479 23.8% 23.6% (613,651) 92,834 353,6379,487 $26.31Dallas CBD

10,619,95181 11.4% 0.3% 1,238,888 11.7% 11.6% (176,637) 0 280,489(11,181) $25.69Fort Worth CBD

253,484,3123,579 13.8% 0.7% 36,767,214 14.5% 14.7% 4,018,735 4,542,988 10,657,2101,069,356 $24.42Dallas Suburban


319,920,1004,323 14.8% 0.7% 49,528,953 15.5% 15.5% 3,060,573 5,067,429 11,523,510630,623 $24.55Total DFW Market

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT




EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A

537,250,7yawsserpxE lartneC 22 13.2% 0.2% 947,846 13.4% 14.5% 388,593 0 076,889 $ 28.65

665,760,32DBC sallaD 26 25.6% 1.3% 6,183,925 26.8% 26.4% (709,937) 92,834 353,637(32,060) $ 26.97

064,041sallaD tsaE 00205,01%5.61%1.01571,41%0.1%1.92 9,006 $ 33.82

906,546,13sallaD htroN raF 500,067,5272,801,1830,518%9.21%4.21601,739,3%3.1%1.11251 135,811 $ 32.07

116,489,5DBC htroW troF 17 14.2% 0.4% 874,387 14.6% 14.5% (105,449) 0 280,489(4,878) $ 29.21

744,487,81saniloC saL 204,003,1912,186533,153%8.61%4.51035,698,2%2.2%2.3177 436,507 $ 28.14

007,186,01yaweerF JBL 00595,931%4.42%9.42942,466,2%1.1%9.3273 (59,582) $ 25.36

557,474notneD / ellivsiweL 00187,09%7.6%7.2206,21%0.0%7.26 0 $ 25.39

106,568,7seitiC-diM 40 12.2% 1.3% 1,058,028 13.5% 13.6% 109,540 38,000 786,76212,859 $ 25.95

772,115htroW troF htroN 00997,801%0.0%9.4620,52%0.0%9.42 46,234 N/A

958,414htroW troF tsaehtroN 00)704,7(%7.97%5.18710,833%0.0%5.182 9,565 $ 21.29

491,532,4retneC notserP 385,1710)564(%9.6%3.7283,803%2.0%1.722 (18,218) $ 38.31

North US-75 Corridor 13,391,79561 14.5% 0.5% 2,013,544 15.0% 13.0% 844,242 928,349 348,441(211,661) $ 26.70

501,225,3htroW troF htuoS 281,061036,262997,301%8.6%1.7897,052%2.0%9.612 (11,588) $ 30.14


Stemmons Freeway 4,473,059 000,360)216,92(%6.91%4.91471,968%1.0%3.9121 6,896 $ 16.51

Uptown / Turtle Creek 10,505,60243 10.0% 0.7% 1,123,400 10.7% 12.7% 546,766 672,158 1,500,471210,199 $ 40.61

Total DFW Market 143,055,376545 15.4% 1.1% 23,532,689 16.5% 16.7% 2,656,120 3,783,462 10,724,972605,979 $ 28.44

Class B

875,459,5yawsserpxE lartneC 0000,53436,431%1.7%6.7737,154%4.0%2.768 (26,919) $ 23.51

876,570,6DBC sallaD 00197,801%7.02%0.02611,612,1%0.0%0.0273 39,041 $ 22.75

032,030,7sallaD tsaE 181 12.7% 0.1% 904,223 12.9% 13.7% (272,661) 99,500 0147,239 $ 19.79

100,188,02sallaD htroN raF 392 15.2% 0.3% 3,244,074 15.5% 15.5% (284,215) 235,503 145,08938,939 $ 22.16

687,959,3DBC htroW troF 00)664,97(%0.9%2.9105,463%3.0%9.824 (6,303) $ 19.60

604,052,81saniloC saL 231 13.1% 0.2% 2,425,007 13.3% 12.9% 222,347 58,000 339,359(66,146) $ 20.80

987,359,01yaweerF JBL 128 19.0% 0.4% 2,133,168 19.5% 22.5% 342,228 0 0330,780 $ 17.74

622,289,7notneD / ellivsiweL 356,85309,331266,613%6.9%8.8742,207%0.1%8.7391 61,673 $ 21.59

274,038,81seitiC-diM 000,52636,122428,671%4.31%5.31547,345,2%5.0%0.31954 43,445 $ 19.63

537,481,3htroW troF htroN 049,32570,651922,091%4.5%8.5400,681%0.1%9.466 (5,135) $ 22.61

Northeast Fort Worth 3,014,86049 47.8% 0.9% 1,468,219 48.7% 35.1% (442,551) 0 0(409,807) $ 19.92

005,188retneC notserP 00874,3%1.01%5.01413,29%3.0%1.0102 (3,095) $ 29.66

North US-75 Corridor 20,983,999 544,851352,803321,351%1.61%0.71108,965,3%1.0%9.61663 (92,627) $ 22.57

186,662,8htroW troF htuoS 250,84209,21)491,32(%8.31%2.41661,171,1%7.0%5.31402 (27,899) $ 21.48


Stemmons Freeway 7,640,684 00733,66%0.82%6.52532,959,1%8.0%9.4289 179,197 $ 15.89


Total DFW Market 149,547,6362,685 15.1% 0.4% 23,150,722 15.5% 15.4% 592,803 1,283,967 798,538161,253 $ 20.84

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT



Class C

401,529yawsserpxE lartneC 00)683,92(%0.5%0.7249,46%2.0%8.684 (19,114) $ 23.25

238,551,3DBC sallaD 00)505,21(%2.9%1.9834,882%0.0%1.954 2,506 $ 18.11

118,376,2sallaD tsaE 00)010,61(%2.7%7.9204,852%0.0%7.9021 (66,109) $ 15.45

210,477sallaD htroN raF 00)887,64(%6.4%9.8077,86%0.0%9.844 (33,326) $ 15.49

455,576DBC htroW troF 00872,8%0.0%0.00%0.0%0.022 0 $ 21.29

991,270,1saniloC saL 00544,8%2.01%4.01607,111%0.0%4.0112 (1,853) $ 14.15

297,526yaweerF JBL 00029,2%4.22%1.42017,051%0.0%1.4203 (10,417) $ 16.14


005,228,4seitiC-diM 00366,73%7.21%3.31197,046%0.0%3.31702 (26,004) $ 15.17

090,335htroW troF htroN 00)079,31(%9.6%2.7532,83%0.0%2.792 (1,460) $ 20.09


262,183retneC notserP 00)573,71(%3.62%4.91690,47%0.0%4.9161 26,224 $ 28.30

North US-75 Corridor 2,124,710 00286,79%6.7%7.6046,241%0.0%7.6501 19,719 $ 15.33

350,870,3htroW troF htuoS 00)958,84(%7.7%5.8242,062%0.0%4.8441 (23,501) $ 18.22


698,159,1yaweerF snommetS 62 22.1% 0.0% 431,991 22.1% 22.4% (182,099) 0 04,887 $ 12.92

Uptown / Turtle Creek 503,457 00606%3.7%3.8587,14%0.0%3.832 (4,992) $ 28.80

880,713,72tekraM WFD latoT 1,093 10.4% 0.0% 2,845,542 10.4% 9.9% (188,350) 0 0(136,609) $ 16.73

All Classes

Central Expressway 13,932,417 0000,53148,394%7.01%5.01525,464,1%3.0%2.01651 30,856 $ 26.86

670,992,23DBC sallaD 108 22.9% 0.9% 7,688,479 23.8% 23.6% (613,651) 92,834 353,6379,487 $ 26.31

105,448,9sallaD tsaE 303 11.8% 0.1% 1,176,800 12.0% 12.0% (278,169) 99,500 090,136 $ 18.87

226,003,35sallaD htroN raF 588 12.7% 0.9% 7,249,950 13.6% 13.8% 484,035 1,343,775 5,905,094141,424 $ 27.79

159,916,01DBC htroW troF 81 11.4% 0.3% 1,238,888 11.7% 11.6% (176,637) 0 280,489(11,181) $ 25.69

250,701,83saniloC saL 167,936,1912,937721,285%7.41%3.41342,334,5%2.1%1.31923 368,508 $ 24.47

182,162,22yaweerF JBL 195 21.5% 0.7% 4,948,127 22.2% 23.4% 484,743 0 0260,781 $ 21.38

Lewisville / Denton 10,104,227 356,85309,331337,914%3.8%7.7568,477%8.0%9.6272 63,153 $ 21.95

375,815,13seitiC-diM 706 12.9% 0.6% 4,242,564 13.5% 13.4% 324,027 259,636 811,76230,300 $ 21.54

201,922,4htroW troF htroN 049,32570,651850,582%6.6%9.5562,942%7.0%2.579 39,639 $ 22.13

Northeast Fort Worth 4,420,82089 42.4% 0.6% 1,902,901 43.0% 33.7% (484,678) 0 0(413,690) $ 20.12

659,794,5retneC notserP 385,1710)263,41(%7.8%6.8297,474%2.0%4.885 4,911 $ 36.29

North US-75 Corridor 36,500,504532 15.4% 0.3% 5,725,985 15.7% 14.4% 1,095,047 1,236,602 506,886(284,569) $ 23.89

938,668,41htroW troF htuoS 432,802235,572647,13%9.01%3.11602,286,1%4.0%9.01963 (62,988) $ 22.82


Stemmons Freeway 14,065,639172 22.7% 0.5% 3,260,400 23.2% 24.5% (145,374) 0 63,000190,980 $ 15.84


Total DFW Market 319,920,1004,323 14.8% 0.7% 49,528,953 15.5% 15.5% 3,060,573 5,067,429 11,523,510630,623 $ 24.55

EXISTING PROPERTIES

Colliers Markets Total

InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Bldgs





Plano Pky @ Parker Rd Far North Dallas 300,000 AmerisourceBergen Specialty Group, Inc. Oct-16

14555 N Dallas Pky Far North Dallas 120,000 Project Ghost Nov-16*

1201 E Campbell Rd North US-75 Corridor 114,247 Qorvo Oct-16

7500 Dallas Pky Far North Dallas 96,698 Alliance Data Systems Corporation Dec-16

1954 Commerce St Dallas CBD 92,237 The Dallas Morning News, Inc. Dec-16

8555 Airport Fwy Mid Cities 87,185 Stericycle Nov-16

7250 N Dallas Pky Far North Dallas 84,081 Hilti, Inc. Oct-16

1601 Elm St Dallas CBD 83,765 WeWork Oct-16

2375 N Glenville Dr North US-75 Corridor 64,916 Service King Collision Repair Centers Nov-16

1500 Solana Blvd Mid Cities 62,000 Goosehead Insurance Nov-16

Leasing Activity

Leasing Activity for 2016 totaled 18.9 million square feet, which is about 5.5 million square feet below 2015’s leasing level. Approximately 220 deals were signed in 2016, signaling that tenants are leasing smaller spaces. This lags behind 2015’s level by about 20 but it is significantly above the 173 transactions signed in 2014,

Q4 2016 Significant Sales Transactions – (100,000 SF or greater)

BUILDING NAME SUBMARKET RBA (SF) YEAR BUILT BUYER SELLER SALE PRICE $/SF DATE SOLD

Legacy Tower Far North Dallas 342,000 2014 Intercontinental RE Trammell Crow Co $136,875,000 $400 Oct-16

State Farm Office Campus Richardson 2,057,630 2015 Transwestern Investment Group

State Farm Insurance Company $773,092,425 $400 Oct-16

One Greystone Center LBJ Freeway 294,672 1983 Greenfield Partners Younan Properties $20,350,000 $69 Nov-16

Eighty-Eighty Central Central Expressway 289,041 1984 Foundry Commercial Femini Rosemont $59,000,000 $205 Nov-16

CVS Health Tower Las Colinas 314,643 1999 Piedmont Office Realty Trust

Columbia Property Trust $51,000,000 $162 Dec-16

Ericsson Village Far North Dallas 490,000 2001 Entergy Ericsson $147,500,000 $301 Dec-16

Carpenter Corporate Center Las Colinas 226,822 2009 Quarry Capital/Dennis Troesh

Gramercy Property Trust $48,300,000 $213 Dec-16

Three Forest Plaza LBJ Freeway 366,549 1983 Hartman Short Term Income Properties

Massachusetts Mutual Life Insurance

Company$35,655,000 $92 Dec-16

Campus at Legacy West Far North Dallas 1,957,821 1992 Dreien Opportunity

Partners JC Penney $353,000,000 $180 Dec-16

Sales Activity

Investment activity was strong in Q4, with 28 properties over 100,000 square feet trading. Transaction volume in Q4 exceeded even the Q3 total, which was the highest in over a decade, reaching $2.4 billion due to several large transactions. The average price per square foot rose to $209, drawn upward by prices of over $400/sf for Legacy Tower and the State Farm office campus sale-leaseback.

*Colliers transaction




MID-CITIES 811K SF

LAS COLINAS 1.6M SF



TOTA

L: 1

1.4M

SF

15.5% 630M SFVACANCY NET ABSORPTION

320M SFTOTAL OFFICEINVENTORY

Q4 2016 HIGHLIGHTS


ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

53118.8M SF

15.5%

43231.1M SF20.7%

44268.3M SF

18.4%

13545.5M SF

20.0%

4117.8M SF

22.7%

1722.9M SF

23.8%

143.1M SF149.5M SF

27.3M SF

UNDERCONSTRUCTION

SUBMARKET SF


BUILT%


+E BUILDINGS



Quadrangle Office Tower 2828 Routh St Uptown/Turtle Creek 128,905 1986 99% 1,619 $37.50 +E American Realty Advisors

Legacy Town Center HQ 1 7800 N Dallas Pky Far North Dallas 157,800 2013 98% 3,230 $35.50 +E Randy Heady & Company Realtors


3100 Monticello 3100 Monticello Ave Preston Center 174,879 1983 100% 31,904 $34.91 +E Westdale

NNN BUILDINGS





2000 McKinney 2000 McKinney Ave Uptown/Turtle Creek 447,595 2008 95% 20,782 $38.00 NNN Union Investment Real Estate

1900 Pearl 1900 N Pearl St Dallas CBD 261,400 2017 20% 209,200 $37.50 NNN Lincoln Property Company







RESEARCHERS:



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820

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DNT

DNT

LLT

LLT

45

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75

75

1709

12

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12

635

635

408

161

161

161

114

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360

377

377

377

380

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199

287

287

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287B

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67

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DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTER

WINGREN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10


1 1013.9m SF 10.5% Vac UC = None $ 26.86 PSF 4.2m SF 5.9% Vac UC = 23.9K SF $ 22.13 PSF


3 129.8m SF 12% Vac UC = None $ 18.87 PSF 5.5m SF 8.6% Vac UC = 171.6K SF $ 36.29 PSF








Total Market

156 Bldgs

108 Bldgs

303 Bldgs

588 Bldgs

81 Bldgs

329 Bldgs

195 Bldgs

272 Bldgs

97 Bldgs

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

89 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

Stemmons Freeway


706 Bldgs

58 Bldgs

532 Bldgs

369 Bldgs

157 Bldgs

172 Bldgs

111 Bldgs

4,323 Bldgs

Uptown hits high-water marks for sale prices and rental rates




Construction continues to be the headline in the Dallas-Fort Worth market. Developers broke ground on nearly 2 million square feet in Q3 2016, bringing the total office space under construction to 11.4 million square feet. Job growth in Dallas-Fort Worth continues to outpace other Texas cities, however it appears the upcoming election is causing trepidation among decision makers as leasing activity slowed this quarter.

The Uptown submarket saw several high-water marks this quarter, bringing it closer to markets in top-tier cities. For the first time, Colliers Research reported gross asking rates for Class A office in Uptown/Turtle Creek exceeded $40. This high water mark puts Uptown/Turtle Creek on par with submarkets inside Chicago’s Loop and Seattle’s core. Rates are rising to cover the construction cost as new projects add amenities and high-end finishes. As rates increase, so do sale prices, as evidenced by prices topping $500/sf for multitenant office buildings 17Seventeen and 2000 McKinney.

Overall asking rental rates climbed by 1.2% from Q2 to Q3 2016. However, some tenants are starting to push back, especially in areas where vacancy has plateaued. Vacancy in most submarkets held relatively steady, increasing or decreasing by less than 1%. Uptown/Turtle Creek saw an increase of 3.2% as McKinney & Olive and Parkview at McKinney both delivered but tenants have not yet moved in.

A Look Ahead> Vacancy rates moved slightly upward as more new spec

construction was completed. As of the end of Q3 2016, there was about 5.6 million square feet of speculative space being constructed, of which approximately 1.9 million was expected to finish in Q4 2016.

> During Q3 2015, there were reports of a slowdown in leasing activity. Some of this may be tied to uncertainty concerning the November election, and therefore activity should pick up toward the latter half of Q4 2016.

> Development of mixed-use projects will continue due to the success of current projects such as Legacy West and The Star in Frisco, which is pushing pricing as space is leased.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 15.4% 16.7% 15.3%

Change from prior Quarter -0.1% -0.5% 0.4%





Average $24.33 $28.26 $20.65




AnnualChange

Quarterly Change

4th Qtr. Forecast*

Vacancy

Net Absorption

Under Construction

Rental Rate

*Projected

https://www.facebook.com/colliersdfw

https://www.linkedin.com/company/2210310

https://twitter.com/colliers_dfw


Market Highlights> The Dallas-Fort Worth area continues to see solid economic growth. August job growth

was an annualized 5.3% in Dallas and 1.1% in Fort Worth. As more people joined the labor market, the unemployment rate rose to 4.6% in Dallas and 3.7% in Fort Worth, but remains behind the U.S. rate of 5.0%.

> Speculative office construction continues as investors continue to see opportunity from rising rental rates. 11.4 million square feet was under construction at the end of Q3 2016, but less than half is in build-to-suit properties. The remaining square footage under construction is spec construction which is 31% pre-leased.

Vacancy RateThe vacancy rate has held steady over the last few quarters and decreased only 0.1% from Q2 to 15.4% in Q3 2016. Class A vacancy decreased 0.5% to 16.7%, while Class B vacancy rose 0.4% to 15.3%.

North Fort Worth continues to have the lowest vacancy rate, dropping 2% to 6.7%, standing in sharp contrast to its neighbor Northeast Fort Worth which had the highest vacancy rate of 32.3%. Preston Center had the lowest Class A vacancy rate of of the two markets that are over 70% Class A at 6.9%, half of Uptown/Turtle Creek’s vacancy rate of 13.0%.

Absorption & DemandOverall net absorption continues to lag behind 2015’s rate. The market absorbed 2.5 million square feet, just over half of what was absorbed during the same quarter 2015. Absorption is predicted to pick up in Q4 2016, as tenants waiting for buildings to be delivered move in. The 530,000 SF McKinney & Olive, which delivered this quarter and is 87.5% leased will see over 100,000 square feet of additional absorption in Q4.

The North US 75 Corridor had the highest absorption of any submarket in Q3 with 1.1 million. This is bolstered by State Farm’s move to 499,992 in building D of their CityLine Campus, and RealPage’s headquarters relocation to 2201 Lakeside Blvd. Occupancy in the Dallas CBD has fallen significantly this year, with negative 548,000 SF of absorption overall and 602,000 square feet of negative absorption for Class A.

Rental RatesAfter surpassing $24 overall for the first time in Q2, rates continued to grow in Q3 averaging a gross asking rate of $24.33, an increase of 1.2% from the prior quarter. Class A rates rose $0.22 to $28.26 and Class B rates grew $0.33, averaging $20.65 per square foot.

Uptown/Turtle Creek rates topped $40 for the first time, putting the submarket on par with submarkets in major markets such as Chicago, Seattle, and Los Angeles. However, Uptown still remains a bargain when compared to premium coastal markets such as Midtown Manhattan and San Francisco’s Financial District, which command between $65 to $85 per square foot. With each new project in Uptown seeking to outdo the others with amenities and high-end finishes, the submarket’s asking rates are pulling far ahead of its former competitor Preston Center, which as recently as Q3 2014 commanded higher rates. Even though Class A rates in Preston Center rose $0.37 in Q3 2016, its average asking rate is almost $3 less than Uptown’s asking rates.

0%

5%

10%

15%

20%

25%

0

2,500,000

5,000,000

7,500,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Squa

re F

eet

Vaca

ncy

Rate



DFW 4.1% 4.1%

Texas 4.5% 4.9%

U.S. 5.2% 5.0%


# of Jobs Added

DFW 3.4% 117.3K

Texas 1.6% 190.6K

U.S. 1.7% 2,443.0K




$20

$21

$22

$23

$24

$25

$26

$27

$28

$29

14%

15%

16%

17%

18%

19%

2008 2010 2012 2014 2016


-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2012 2013 2014 2015 2016





EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT



8133Q 6102 ,944,3074,300 14.8% 0.6% 49,240,867 15.4% 15.5% 2,512,496 4,230,129 11,413,0501,603,980 $ 24.33

7132Q 6102 ,422,9084,276 15.0% 0.5% 49,319,789 15.5% 15.4% 908,516 2,708,730 10,936,512463,607 $ 24.04

6131Q 6102 ,411,5834,262 14.8% 0.6% 48,772,071 15.4% 15.1% 444,909 1,697,405 10,270,613444,909 $ 23.91

4134Q 5102 ,714,1784,241 14.5% 0.6% 47,519,575 15.1% 15.1% 6,309,640 6,823,534 9,300,5051,255,803 $ 23.53

3133Q 5102 ,314,7784,230 14.6% 0.6% 47,375,978 15.1% 15.0% 5,053,837 5,424,134 6,877,5171,244,313 $ 23.07

6033Q 4102 ,922,6714,166 14.7% 0.7% 47,353,947 15.4% 16.0% 4,810,303 2,735,584 7,051,9952,551,319 $ 21.46

3033Q 3102 ,632,8004,108 15.6% 0.6% 49,112,237 16.2% 16.6% 2,324,370 1,823,761 5,229,3831,993,138 $ 20.41

1033Q 2102 ,528,3824,069 16.0% 0.5% 49,837,644 16.5% 16.8% 2,212,069 1,397,773 2,454,3241,337,995 $ 19.71

Class A22,964,11525 24.9% 1.1% 5,984,891 26.1% 26.1% (602,491) 0 401,9379,171 $26.64Dallas CBD

5,914,24617 14.2% 0.5% 869,509 14.7% 14.5% (100,571) 0 280,489(11,047) $29.12Fort Worth CBD

108,945,923475 13.8% 1.1% 16,192,597 14.9% 15.6% 2,613,071 3,136,998 9,520,6851,602,871 $28.90Dallas Suburban


142,272,525542 15.6% 1.0% 23,705,049 16.7% 17.2% 2,070,989 3,399,628 10,363,2931,694,027 $28.26Total DFW Market


3,959,78942 8.6% 0.4% 358,198 9.0% 8.3% (73,163) 0 0(30,369) $19.69Fort Worth CBD

124,609,2392,269 14.8% 0.4% 18,829,632 15.1% 14.7% 321,217 702,232 1,012,717(260,248) $20.73Dallas Suburban


149,114,3952,666 14.9% 0.4% 22,786,399 15.3% 14.9% 492,216 830,501 1,049,757(163,640) $20.65Total DFW Market


730,55423 5.2% 0.0% 38,000 5.2% 5.2% 8,278 0 00 $16.02Fort Worth CBD

19,093,259814 10.8% 0.0% 2,063,742 10.8% 11.2% 15,164 0 074,507 $15.72Dallas Suburban

4,588,742211 7.8% 0.0% 356,733 7.8% 7.9% (59,140) 0 06,111 $18.70Fort Worth Suburban

27,557,3871,092 9.9% 0.1% 2,749,419 10.0% 10.2% (50,709) 0 073,593 $16.32Total DFW Market

All Classes32,208,933106 22.5% 0.8% 7,530,992 23.4% 23.6% (547,752) 0 401,93772,101 $25.70Dallas CBD

10,604,58982 11.5% 0.5% 1,265,707 11.9% 11.5% (165,456) 0 280,489(41,416) $25.56Fort Worth CBD

252,648,4213,558 14.0% 0.6% 37,085,971 14.7% 14.8% 2,949,452 3,839,230 10,533,4021,417,130 $24.29Dallas Suburban


318,944,3074,300 14.8% 0.6% 49,240,867 15.4% 15.5% 2,512,496 4,230,129 11,413,0501,603,980 $24.33Total DFW Market



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A

519,150,7yawsserpxE lartneC 00407,113%8.41%5.41537,420,1%2.0%3.4122 19,796 $ 28.40

511,469,22DBC sallaD 25 24.9% 1.1% 5,984,891 26.1% 26.1% (602,491) 0 401,9379,171 $ 26.64

064,041sallaD tsaE 00694,1%5.61%5.61181,32%0.1%5.512 0 $ 33.85

155,717,13sallaD htroN raF 152 11.7% 1.2% 4,098,937 12.9% 12.7% 653,207 1,108,272 5,501,948(71,440) $ 31.82

642,419,5DBC htroW troF 17 14.2% 0.5% 869,509 14.7% 14.5% (100,571) 0 280,489(11,047) $ 29.12

147,465,81saniloC saL 204,531,1912,664)186,38(%0.71%8.61645,611,3%2.2%6.4167 39,981 $ 27.55

144,486,01yaweerF JBL 00771,991%1.42%1.42484,475,2%7.0%4.3273 3,790 $ 24.96


605,468,7seitiC-diM 048,327000,83186,69%6.31%6.31788,070,1%3.1%3.2104 32,377 $ 26.04



735,181,4retneC notserP 385,1710357,71%4.8%9.6461,092%2.0%8.622 62,284 $ 37.67

North US 75 Corridor 13,315,66960 12.3% 0.7% 1,726,253 13.0% 21.1% 1,055,533 852,349 424,4411,278,376 $ 26.31

501,225,3htroW troF htuoS 281,061036,262783,511%6.3%8.6012,932%3.0%5.612 53,090 $ 30.04


267,571,4yaweerF snommetS 000,360)805,63(%8.02%0.12070,678%1.0%9.0221 (6,197) $ 16.72

Uptown / Turtle Creek 10,470,58543 12.4% 0.6% 1,363,238 13.0% 9.5% 306,928 672,158 1,500,471236,391 $ 40.61

Total DFW Market 142,272,525542 15.6% 1.0% 23,705,049 16.7% 17.2% 2,070,989 3,399,628 10,363,2931,694,027 $ 28.26

Class B

288,198,5yawsserpxE lartneC 0000,53354,951%6.7%0.7920,214%4.0%6.658 34,129 $ 22.80

689,990,6DBC sallaD 00057,96%7.12%6.02751,552,1%0.0%6.0273 69,955 $ 19.98

617,879,6sallaD tsaE 181 13.5% 0.1% 948,912 13.6% 14.0% (412,429) 0 99,50030,266 $ 19.86

791,019,02sallaD htroN raF 388 15.5% 0.1% 3,272,307 15.6% 13.7% (310,450) 173,165 225,089(327,907) $ 22.03

987,959,3DBC htroW troF 00)361,37(%3.8%0.9891,853%4.0%6.824 (30,369) $ 19.69

636,842,81saniloC saL 231 12.9% 0.1% 2,358,861 12.9% 13.2% 288,493 58,000 339,35997,314 $ 20.79

858,569,01yaweerF JBL 00)507,9(%1.32%7.22101,584,2%7.0%9.12921 42,970 $ 18.02


909,665,81seitiC-diM 147,08107,931447,521%4.21%8.21580,183,2%4.0%4.21254 (27,778) $ 19.85

114,371,3htroW troF htroN 049,32763,511689,761%2.6%6.5891,671%9.0%7.476 62,339 $ 22.94


005,188retneC notserP 00375,6%5.9%1.01912,98%3.0%8.902 (5,139) $ 29.24

North US 75 Corridor 20,884,669361 16.2% 0.1% 3,418,389 16.4% 15.2% 209,980 153,268 201,753(180,632) $ 22.25

124,232,8htroW troF htuoS 001,31209,21357,71%6.31%7.31912,031,1%2.0%5.31202 1,991 $ 21.29


578,886,7yaweerF snommetS 00)896,21(%4.72%3.72448,890,2%8.0%5.6299 6,255 $ 16.15


593,411,941tekraM WFD latoT 757,940,1105,038612,294%9.41%3.51993,687,22%4.0%9.41666,2 (163,640) $ 20.65



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class C


238,441,3DBC sallaD 00)110,51(%0.9%3.9449,092%4.0%9.844 (7,025) $ 18.49

875,466,2sallaD tsaE 00994,94%0.8%2.7397,191%0.0%2.7911 21,043 $ 14.33

036,558sallaD htroN raF 00)264,31(%9.2%1.4444,53%0.0%1.454 (10,284) $ 13.01

455,037DBC htroW troF 00872,8%2.5%2.5000,83%0.0%2.532 0 $ 16.02

991,270,1saniloC saL 00892,01%5.01%2.01358,901%0.0%2.0112 3,187 $ 13.08

297,526yaweerF JBL 00733,31%4.42%4.22392,041%0.0%4.2203 12,101 $ 15.89


601,458,4seitiC-diM 00769,95%6.31%6.21783,216%0.0%6.21602 49,501 $ 14.82

090,335htroW troF htroN 00)015,21(%6.9%9.6577,63%0.0%9.692 14,480 $ 20.27


923,053retneC notserP 00)995,34(%8.71%0.02521,07%0.0%0.0251 (7,606) $ 28.93


155,460,3htroW troF htuoS 00)853,52(%0.8%7.7147,632%0.0%7.7441 8,565 $ 18.60


Stemmons Freeway 2,008,08462 23.3% 0.0% 468,357 23.3% 21.8% (186,985) 0 0(29,673) $ 13.82


783,755,72tekraM WFD latoT 00)907,05(%2.01%0.01914,947,2%1.0%9.9290,1 73,593 $ 16.32

All Classes

Central Expressway 13,886,801156 10.4% 0.3% 1,486,963 10.7% 10.9% 459,450 35,000 022,490 $ 26.23

339,802,23DBC sallaD 106 22.5% 0.8% 7,530,992 23.4% 23.6% (547,752) 0 401,93772,101 $ 25.70

457,387,9sallaD tsaE 302 11.8% 0.1% 1,163,886 11.9% 12.4% (361,434) 0 99,50051,309 $ 18.94

873,384,35sallaD htroN raF 585 13.1% 0.8% 7,406,688 13.8% 12.9% 329,295 1,281,437 5,727,037(409,631) $ 27.33

985,406,01DBC htroW troF 82 11.5% 0.5% 1,265,707 11.9% 11.5% (165,456) 0 280,489(41,416) $ 25.56

675,588,73saniloC saL 167,474,1912,425011,512%0.51%7.41062,585,5%1.1%6.31823 140,482 $ 23.91

190,672,22yaweerF JBL 196 22.6% 0.7% 5,199,878 23.3% 23.6% 202,809 0 058,861 $ 21.32


125,582,13seitiC-diM 698 12.4% 0.6% 4,064,359 13.0% 12.9% 282,392 177,701 804,58154,100 $ 21.82

877,712,4htroW troF htroN 049,32763,511140,812%7.8%7.6332,482%7.0%1.689 125,102 $ 22.50


663,314,5retneC notserP 385,1710)372,91(%2.9%3.8805,944%2.0%1.875 49,539 $ 35.77

North US 75 Corridor 36,324,443526 14.3% 0.3% 5,298,967 14.6% 16.9% 1,351,510 1,005,617 626,1941,123,789 $ 23.40

770,918,41htroW troF htuoS 282,371235,572287,701%2.01%8.01071,606,1%2.0%6.01763 63,646 $ 22.65




Total DFW Market 318,944,3074,300 14.8% 0.6% 49,240,867 15.4% 15.5% 2,512,496 4,230,129 11,413,0501,603,980 $ 24.33





600 Hidden Rdg Office Ctr/West LBJ Ext 576,138 Verizon Aug-16

1201 Elm St Dallas CBD 229,000 Environmental Protection Agency Region 6 Sep-16

1201 E Campbell Rd Richardson 114,247 Qorvo Sep-16

1 Cowboys Way Frisco/The Colony 79,428 FM Global* Aug-16

1 Cowboys Way Frisco/The Colony 63,325 Bank of America Aug-16

930 E Campbell Rd Richardson Ret 57,327 Convergys Corporation Jul-16

4040 N Central Expy Central Expressway 52,700 U.S. Department of Veterans Affairs Aug-16

300 E John Carpenter Fwy Urban Center/Wingren 45,806 BMO Harris Bank Aug-16

1920 McKinney Ave Uptown/Turtle Creek 44,530 WeWork Sep-16

350 Highland Dr Lewisville 40,000 Ezlynx Aug-16

Leasing Activity

Year-to-date leasing activity totals 14.2 million square feet, slightly less than the same period in 2015. The 2,950 deals signed through Q3 2016 is about on pace with 2015, indicating that the average deal signed this year is smaller than in the prior year.



Emerald Plaza* Quorum/Bent Tree 74,182 1985 Grander Capital Partners TriGate Capital $7,550,000 $102 7/6/2016

One Victory Park Uptown/Turtle Creek 436,253 2008 Clarion Partners Hines Secuirties $183,000,000 $419 7/14/2016

Chase Tower Dallas CBD 1,248,230 1987 Fortis Property Group Hines REIT $273,000,000 $219 8/1/2016

2000 McKinney Ave Uptown/Turtle Creek 447,595 2008 Union Investment Real

Estate GmbH

Corrigan Properties & Lincoln Porperty

Company$225,800,000 $505 8/3/2016

Verizon Irving Regional Headquarters - 600 & 700 Hiddge Ridge Dr

Office Center/ West LBJ 1,150,000 1991 Mesirow Financial Verizon $344,000,000 $299 8/17/2016

Park Creek Place* Uptown/Turtle Creek 112,205 1983 Angelo, Gordon, & Co. Embrey Family

Foundation $23,000,000 $205 8/22/2016

17Seventeen McKinney Uptown/Turtle Creek 369,017 2010 Gaedeke Group Granite Properties $190,000,000 $526 9/29/2016

Sales Activity

Investment activity continued steady with 20 properties greater than 100,000 SF trading during Q3. Transaction volume increased to $1.9 billion due to record pricing on several transactions. The average price per square foot rose $50 to $175 during Q3, but still remains below the national average of $260 per square foot.




NORTH US 75 CORRIDOR 626K SF

MID-CITIES 805K SF

LAS COLINAS 1.5M SF



TOTA

L: 1

1.4M

SF

15.5% 1.60M SFVACANCY NET ABSORPTION


Q3 2016 HIGHLIGHTS


ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

54719.3M SF15.10%

44431.9M SF

19.9%

47172.8M SF18.80%

14448.1M SF

17.6%

4127.0M SF16.50%

1722.9M SF22.10%

142.3M SF149.1M SF

27.6M SF

UNDERCONSTRUCTION

SUBMARKET SF


BUILT%


+E BUILDINGS


Victory Plaza West 3090 Olive St Uptown/Turtle Creek 116,891 2006 100% 55,646 $38.50 +E Estein & Associates USA


Victory Plaza East 3030 Olive St Uptown/Turtle Creek 110,000 2006 93% 13,784 $37.00 +E Estein & Associates USA

Quadrangle Office Tower 2828 Routh St Uptown/Turtle Creek 128,905 1986 99% 1,619 $36.00 +E American Realty Advisors

8235 Douglas 8235 Douglas Ave Preston Center 163,861 1980 80% 40,712 $35.00 +E Ascentis Real Estate Partners, LLC

NNN BUILDINGS



2000 McKinney 2000 McKinney Ave Uptown/Turtle Creek 447,595 2008 95% 25,272 $40.00 NNN Union Investment Real Estate GmbH


Rosewood Court 2101 Cedar Springs Rd Uptown/Turtle Creek 405,291 2008 98% 55,894 $36.50 NNN Rosewood Property Company

Frost Tower 2950 N Harwood St Uptown/Turtle Creek 167,735 2015 94% 9,705 $36.00 NNN Harwood International







RESEARCHERS:



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20

30

30

308080

820

820

820

DNT

DNT

LLT

LLT

45

45

75

75

1709

12

12

12

12

12

12

12

635

635

408

161

161

161

114

121

121

121

121

1212499

303

352

190

190

190

78

78

66

205

183

183

183

183

67

67

67

360

377

377

377

380

380

380

199

287

287

287B

287B

35

35E

35W

35E

35W

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35W

35E35W

30

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35W

67

67

377

288

114

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20

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380

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DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTER

WINGREN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10












Stemmons Freeway


698 Bldgs

57 Bldgs

526 Bldgs

367 Bldgs

155 Bldgs

173 Bldgs

112 Bldgs

4,300 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

89 Bldgs

Total Market

156 Bldgs

106 Bldgs

302 Bldgs

585 Bldgs

82 Bldgs

328 Bldgs

196 Bldgs

270 Bldgs

98 Bldgs




mailto:mike.otillo%40colliers.com?subject=3rd%20Quarter%20Market%20Report

mailto:kari.beets%40colliers.com?subject=3rd%20Quarter%20Market%20Report

Construction Continues as Market Shows Signs of a Slowdown


DALLAS/FORT WORTH | OFFICEQ2 2016


Cranes are flying over the Dallas-Fort Worth area, as more square feet of office space is under construction than any time since Q2 1999, when the dot-com boom was just beginning. Job growth continues to climb, supporting the demand for new office space. Dallas-Fort Worth has added 39,800 jobs so far in 2016, with most gains coming in financial activities and education and health services. In response to the influx of new jobs, Dallas-Fort Worth is now the top U.S. metro in terms of annual new-home starts, overtaking Houston which continues to struggle as oil prices remain low.

Growth in the Fort Worth half of the metroplex remains constrained by its reliance on energy and manufacturing. New construction is primarily in the eastern half of the DFW area – with only 3 of 53 total buildings under construction in the loop around Fort Worth.

The pace of growth in the real estate market has been slowing for the past few quarters, with average rents continuing upward at a slower rate and vacancy levels hovering up and down several tenths from 15% the last few quarters. The Federal Reserve’s Beige Book also noted concerns about the job market, as several sectors observed skills shortages.

The construction boom in DFW has been measured growth – currently more than 65% of projects under construction are pre-leased, and many more have strong activity from potential tenants. Lenders are still cautious in approving debt, especially for construction loans. While the market may be slowing, caution by both developers and lenders will allow it to continue on a steady path upward.

A Look Ahead> Slowdown in rental rate growth will continue, as vacancy rates

have flattened out and demand is slower than in 2015.

> Almost 3.4 million square feet is expected to deliver in the second half of 2016, of which 65% is preleased. Deliveries in the Uptown/Turtle Creek submarket are expected to add 872,000 square feet, while Far North Dallas will add almost 1.2 million square feet to its inventory.

> The delivery of the almost-full McKinney & Olive in August will create large vacancies in the Dallas CBD submarket as downtown law firms move into new Uptown space. This trend will create opportunities for value-add plays in the Downtown market as buildings will require renovations and new leasing strategies to compete with Uptown.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 15.4% 16.5% 15.2%

Change from prior Quarter 0.1% 0.2% -0.2%





Average $24.02 $28.11 $20.31




AnnualChange

Quarterly Change

2nd Qtr. Forecast*

VACANCY

NET ABSORPTION

UNDER CONSTRUCTION

RENTAL RATE

*Projected




2 Dallas/Fort Worth Research & Forecast Report | Q2 2016 | Office | Colliers International

Market Highlights> Economic activity continues to expand in the metroplex, especially in Dallas where

the Federal Reserve noted an annual 4.1% increase in jobs in May, while Fort Worth experienced a gain of 0.6%. Fort Worth’s economic forecast should improve as the energy sector continues to rebound.

> Total vacancy in the market continues steady at 15.4%, only a 0.1% increase from the prior quarter, as average rents increase at a slowing rate.

> Construction continues to increase above the levels in the 2007-2008 boom, but still well below the 16 million square feet under construction in the late 1990s. Most developers have waited for a large tenant to break ground, but there are nearly 2 million square feet in large spec office projects currently under construction.

Vacancy RateVacancy in the Dallas-Fort Worth market continued its gradual rise, increasing from 15.3% in Q1 to 15.4% in Q2 2016 and up 0.5% from Q1 2015. Class A vacancy increased 0.2% from 16.3% to 16.5%, while Class B vacancy decreased 0.2%.

The Lewisville/Denton and North Fort Worth submarkets tied for the lowest overall vacancy rate at 8.4%. Northeast Fort Worth had the highest vacancy rate of 31.5% due to large vacancies in Fossil Creek Business Park and the FAA Headquarters. Preston Center continued to have the lowest Class A vacancy rate of any market with more than 10 buildings at 8.4%, but this was a 0.5% increase over the prior quarter.

Absorption & DemandNet absorption continued at a slower pace than in 2015, with 532,660 square feet absorbed in Q2 2016 for a total of 1,053,128 absorbed year-to-date. This is over 2.8 million less than absorbed through Q2 2015. Class A absorption was 60% of the Q1 2016 rate at 220,563 square feet. However, absorption should pick up at the end of the year as several large projects are delivered.

Far North Dallas absorbed 877,272, the highest of any submarket in the metroplex, which included Pizza Hut’s move-in to their headquarters expansion and 380,000 square feet of sublease space. Las Colinas had the lowest level at negative 416,395 square feet, 280,000 of which was NEC Corporation’s vacating the Apex at Los Colinas after Mercer’s purchase.

Rental RatesRental rates continued their gradual climb in the second quarter, topping $24 for the average gross rate for the first time. However, the increase in rental rate has slowed – the average rate grew only 0.42% from Q1 to Q2 2016. Class A rental rates grew to $28.11 on average, while Class B rates rose $0.12 to $20.31.

For Class A product, Uptown/Turtle Creek continues to command premium rates of $39.21 on average, boosted by rates near $50 gross at 1717 McKinney, McKinney & Olive, and other new projects. After falling slightly in Q1 2016, Preston Center Class A rates rose again to an average of $37.30 PSF.

0%

5%

10%

15%

20%

25%

0

2,500,000

5,000,000

7,500,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Squa

re F

eet

Vaca

ncy

Rate



DFW 4.0% 3.5%

Texas 4.3% 4.2%

U.S. 5.3% 4.5%


# of Jobs Added

DFW 3.7% 125.3K

Texas 1.5% 171.8K

U.S. 1.6% 2,324.0K



0%

5%

10%

15%

20%

25%

0

2,500,000

5,000,000

7,500,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


Squa

re F

eet

Vaca

ncy

Rate

$20

$21

$22

$23

$24

$25

$26

$27

$28

$29

14%

15%

16%

17%

18%

19%

2008 2010 2012 2014 2016


-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

2012 2013 2014 2015 2016




Dallas/Fort Worth Downtown & Suburban Office Market Summary

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT


QUARTERLY AND ANNUAL HISTORICAL COMPARISONS7132Q 6102 ,635,6204,256 14.8% 0.5% 48,779,011 15.4% 15.3% 1,053,128 2,483,598 10,944,558532,660 $ 24.02

6131Q 6102 ,846,9174,244 14.7% 0.6% 48,522,968 15.3% 15.0% 520,468 1,694,895 10,734,495520,468 $ 23.92

5134Q 5102 ,152,0224,223 14.5% 0.6% 47,355,951 15.0% 15.1% 6,512,318 6,793,268 9,627,4011,301,700 $ 23.54

3133Q 5102 ,782,3584,214 14.5% 0.6% 47,287,987 15.1% 14.9% 5,210,618 5,423,604 7,187,4041,284,475 $ 23.08

1132Q 5102 ,752,9214,196 14.2% 0.7% 46,543,025 14.9% 15.3% 3,926,143 3,394,167 7,806,1631,738,271 $ 22.38

6032Q 4102 ,310,0424,126 15.2% 0.7% 48,841,911 15.9% 15.9% 2,173,266 1,608,006 6,445,809774,878 $ 21.16

3032Q 3102 ,186,2204,081 15.8% 0.7% 50,168,043 16.5% 16.4% 286,239 859,062 3,022,188(82,959) $ 20.23

1032Q 2102 ,542,1314,052 16.3% 0.5% 50,675,964 16.8% 16.8% 1,164,395 1,184,211 2,042,888751,475 $ 19.72


5,914,24617 14.0% 0.6% 858,462 14.5% 13.7% (89,524) 0 280,489(48,249) $29.20Fort Worth CBD

107,340,322465 14.3% 0.9% 16,226,111 15.1% 14.9% 1,124,982 1,979,100 9,095,990302,370 $28.72Dallas Suburban


140,485,021531 15.7% 0.8% 23,209,962 16.5% 16.3% 603,136 2,070,748 10,036,942220,563 $28.11Total DFW Market

Class B6,099,98637 21.8% 0.1% 1,338,380 21.9% 21.7% (205) 0 0(11,874) $19.72Dallas CBD

3,959,78942 8.0% 0.0% 316,873 8.0% 7.6% (42,794) 0 0(14,062) $19.65Fort Worth CBD

125,082,2572,250 14.7% 0.3% 18,779,065 15.0% 15.2% 522,953 355,738 812,519270,294 $20.34Dallas Suburban


149,531,2522,642 14.9% 0.3% 22,750,011 15.2% 15.4% 585,932 412,850 907,616320,240 $20.31Total DFW Market

Class C3,144,83244 8.6% 0.4% 283,919 9.0% 9.6% (7,986) 0 016,835 $18.66Dallas CBD

730,55423 5.2% 0.0% 38,000 5.2% 5.5% 8,278 0 02,000 $16.29Fort Worth CBD

19,189,377805 11.1% 0.0% 2,126,875 11.1% 11.0% (69,881) 0 0(14,666) $15.71Dallas Suburban


27,619,3471,083 10.2% 0.1% 2,819,038 10.2% 10.2% (135,940) 0 0(8,143) $16.30Total DFW Market


10,604,58982 11.1% 0.3% 1,213,335 11.4% 10.9% (124,040) 0 280,489(60,311) $25.79Fort Worth CBD

251,611,9563,520 14.2% 0.5% 37,132,051 14.8% 14.7% 1,578,054 2,334,838 9,908,509557,998 $23.91Dallas Suburban


317,635,6204,256 14.8% 0.5% 48,779,011 15.4% 15.3% 1,053,128 2,483,598 10,944,558532,660 $24.02Total DFW Market


Dallas/Fort Worth Office Submarket Summary

EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A

558,150,7yawsserpxE lartneC 00457,762%8.41%2.51586,860,1%2.0%9.4122 (26,149) $ 28.58

511,469,22DBC sallaD 25 23.2% 0.9% 5,545,287 24.1% 23.7% (500,270) 0 342,879(113,645) $ 26.56

064,041sallaD tsaE 00694,1%5.61%5.61181,32%0.1%5.512 0 $ 34.43

795,611,13sallaD htroN raF 849,761,5235,019617,347%5.21%0.21005,727,3%6.0%4.11741 576,304 $ 31.84

642,419,5DBC htroW troF 984,0820)425,98(%7.31%5.41264,858%6.0%0.4171 (48,249) $ 29.20

544,946,81saniloC saL 76 14.7% 2.2% 3,152,024 16.9% 14.0% (123,662) 466,219 918,402(541,453) $ 27.22

870,876,01yaweerF JBL 00442,312%9.42%0.42714,065,2%7.0%3.3273 94,142 $ 24.58


605,628,7seitiC-diM 000,8910403,46%0.61%6.31462,560,1%4.1%2.2193 183,337 $ 26.06



195,771,4retneC notserP 752,6810)135,44(%9.7%4.8844,253%5.0%9.722 (23,681) $ 37.30


321,153,3htroW troF htuoS 485,713846,19792,26%2.3%6.3813,121%2.0%5.302 74,436 $ 29.51



Uptown / Turtle Creek 10,168,271 383,639,10401,421%1.9%8.8230,398%3.0%4.824 28,534 $ 39.21

Total DFW Market 140,485,021 249,630,01847,070,2631,306%3.61%5.61269,902,32%8.0%7.51135 220,563 $ 28.11

Class B

Central Expressway 5,924,668 0000,53814,901%9.9%8.8461,025%3.0%5.848 67,548 $ 22.68

689,990,6DBC sallaD 00)502(%7.12%9.12083,833,1%1.0%8.1273 (11,874) $ 19.72

972,072,7sallaD tsaE 190 14.5% 0.2% 1,069,753 14.7% 8.9% (443,177) 0 99,500(422,234) $ 20.40

066,352,12sallaD htroN raF 876,182260,78)269,4(%2.51%0.41655,579,2%2.0%8.31683 305,904 $ 21.87

987,959,3DBC htroW troF 00)497,24(%6.7%0.8378,613%0.0%0.824 (14,062) $ 19.65

934,502,81saniloC saL 000,850938,661%3.41%7.31172,594,2%1.0%6.31032 114,167 $ 20.77

703,599,01yaweerF JBL 00)948,35(%5.32%6.32594,995,2%5.0%1.32031 (14,746) $ 17.80


021,414,81seitiC-diM 144,89779,58438,751%6.21%5.21170,592,2%4.0%1.21644 46,083 $ 19.66

620,731,3htroW troF htroN 591,28211,75085,501%9.6%7.5975,971%9.0%8.456 49,378 $ 23.33

Northeast Fort Worth 3,037,903 00)910,4(%3.33%8.23165,699%6.0%2.2394 15,468 $ 18.69

772,868retneC notserP 00215,11%3.11%6.9089,28%0.0%6.991 15,129 $ 28.47


192,412,8htroW troF htuoS 209,210714,4%0.41%9.31355,931,1%3.0%5.31991 11,036 $ 21.01


507,441,8yaweerF snommetS 00430,71%6.82%4.82083,513,2%7.0%7.72001 17,296 $ 15.51

Uptown / Turtle Creek 2,669,184 00474,04%0.8%5.8879,622%1.0%4.854 (13,693) $ 34.24

252,135,941tekraM WFD latoT 2,642 14.9% 0.3% 22,750,011 15.2% 15.4% 585,932 412,850 907,616320,240 $ 20.31



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class C


238,441,3DBC sallaD 00)689,7(%6.9%0.9919,382%4.0%6.844 16,835 $ 18.66

861,896,2sallaD tsaE 00658,71%6.8%8.7639,012%0.0%8.7021 21,831 $ 14.90

038,880,1sallaD htroN raF 00)871,3(%9.1%3.2061,52%0.0%3.254 (4,936) $ 13.18

455,037DBC htroW troF 00872,8%5.5%2.5000,83%0.0%2.532 2,000 $ 16.29

991,270,1saniloC saL 00111,7%6.11%5.01040,311%0.0%5.0112 10,891 $ 13.01

297,526yaweerF JBL 00632,1%8.42%4.42493,251%0.0%4.4203 2,834 $ 16.19

658,619,1notneD / ellivsiweL 00)873(%4.6%3.6471,021%0.0%3.667 2,363 $ 18.92

275,887,4seitiC-diM 00666,01%2.41%7.31925,656%0.0%7.31302 21,601 $ 14.75

090,335htroW troF htroN 00)099,62(%0.5%6.9552,15%0.0%6.992 (24,690)

Northeast Fort Worth 1,003,227 00)833,4(%5.6%6.6382,66%0.0%6.693 (1,071) $ 16.75

923,053retneC notserP 00)399,53(%1.71%8.71915,26%0.0%8.7151 (2,780)


421,020,3htroW troF htuoS 00)320,53(%8.8%4.8607,252%0.0%4.8341 13,449 $ 18.62


435,110,2yaweerF snommetS 61 21.8% 0.0% 438,684 21.8% 14.6% (157,312) 0 0(144,533) $ 13.68

Uptown / Turtle Creek 476,936 00)021(%3.5%1.6569,82%0.0%1.622 (3,495)

743,916,72tekraM WFD latoT 1,083 10.2% 0.1% 2,819,038 10.2% 10.2% (135,940) 0 0(8,143) $ 16.30

All Classes


339,802,23DBC sallaD 106 21.5% 0.7% 7,167,586 22.3% 21.9% (508,461) 0 342,879(108,684) $ 25.63

709,801,01sallaD tsaE 312 12.8% 0.1% 1,303,870 12.9% 8.9% (423,825) 0 99,500(400,403) $ 19.28

780,954,35sallaD htroN raF 626,944,5495,799675,537%4.31%6.21612,827,6%4.0%1.21875 877,272 $ 27.23

985,406,01DBC htroW troF 984,0820)040,421(%9.01%4.11533,312,1%3.0%1.1128 (60,311) $ 25.79

380,729,73saniloC saL 204,679912,664882,05%1.41%2.51533,067,5%1.1%0.41723 (416,395) $ 23.79

771,992,22yaweerF JBL 00136,061%2.42%8.32603,213,5%6.0%2.32791 82,230 $ 20.98


891,920,13seitiC-diM 688 12.3% 0.6% 4,016,864 12.9% 13.7% 232,804 85,977 296,441251,021 $ 21.63

393,181,4htroW troF htroN 591,28211,75278,29%0.9%4.8773,053%7.0%7.769 38,970 $ 22.81

Northeast Fort Worth 4,445,068 00)889,61(%7.13%5.13580,204,1%4.0%1.1309 5,766 $ 19.21

791,693,5retneC notserP 752,6810)210,96(%0.9%2.9749,794%4.0%8.865 (11,332) $ 35.54


835,585,41htroW troF htuoS 684,033846,19196,13%5.01%4.01775,315,1%2.0%1.01263 98,921 $ 22.28



Uptown / Turtle Creek 13,314,391 383,639,10854,461%7.8%6.8579,841,1%3.0%4.8901 11,346 $ 38.02

Total DFW Market 317,635,6204,256 14.8% 0.5% 48,779,011 15.4% 15.3% 1,053,128 2,483,598 10,944,558532,660 $ 24.02





Cypress Waters Blvd DFW Freeport/Coppell 225,000 Signet Jewelers Apr-16

15601 Dallas Pky Quorum/Bent Tree 122,000 Fannie Mae May-16

1660 N Westridge Cir Office Ctr/West LBJ Ext 101,120 Molina Healthcare Jun-16

4851 Regent Blvd DFW Freeport/Coppell 100,520 Atos SE Jun-16

8383 Dominion Dr Upper Tollway/West Plano 92,250 CompuCom Systems Inc. Apr-16

4795 Regent Blvd DFW Freeport/Coppell 76,742 First American Title Insurance Company Jun-16

901 Main St Dallas CBD 57,634 Compass Professional Health Services /Life Accent May-16

7880 Bent Branch Dr DFW Freeport/Coppell 53,547 Pacific Union Financial Apr-16

2201 W Plano Pky Plano 52,406 Fresenius Medical Care Jun-16

7301 N State Highway 161 Office Ctr/West LBJ Ext 50,706 DealerSocket Apr-16

Leasing Activity

Leasing activity for the prior 12 months ending June 30, 2016 totaled 20.9 million SF. Year-to-date 8.5 million square feet has been leased and the average lease was 4,420 square feet.



The Geico Building Far North Dallas 244,545 1985 JP Realty Partners Government Employees

Insurance Co. $11,000,000 $45 06/28/2016

Bluffview Towers Preston Center 296,260 1986 Buchanan Street Partners CDI East $28,500,000 $146 05/02/2016

Campbell Creek Business Park

North US 75 Corridor 317,247 1997 Foundry Commercial / ICM Granite Properties $28,000,000 $89 06/15/2016

KPMG Plaza at Hall Arts Dallas CBD 500,000 2015 Unknown Hall Financial Group $225,000,000 $450 05/17/2016

Westway One Las Colinas 165,587 2001 Whitestone REIT Wells Real Estate Funds $21,638,000 $130 06/01/2016

One Glen Lakes Central Expressway 170,000 1981 Cawley Management, LLC Eland Energy Inc $17,500,000 $103 02/29/2016

Las Colinas Commons Las Colinas 239,379 1979/81 David Tessel Behringer $14,362,740 $60 02/02/2016

7610 Stemmons Fwy Stemmons Freeway 127,381 1981 Good Signature

Management Tri Tower Financial Group $4,331,000 $34 02/04/2016

Sales Activity

Investment activity picked up slightly in Q2 2016 with 20 property sales over 100,000 square feet sold this quarter, but the average sales price dropped to $125 per square foot compared to $136 per square foot in Q1 2016. The average cap rate rose slightly to 7.6%.


SOUTH FORT WORTH 330K SF


LAS COLINAS 976K SF



TOTA

L: 1

0.9M

SF

15.4% 533K SFVACANCY NET ABSORPTION


Q2 2016 HIGHLIGHTS


ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

65423.2M SF

15.4%

51136.3M SF

19.8%

46171.0M SF

19.1%

13545.8M SF

19.1%

2818.4M SF

22.3%

1418.4M SF

25.2%

140.5M SF149.5M SF

27.6M SF

UNDERCONSTRUCTION

SUBMARKET SF


BUILT%


+E BUILDINGS


Victory Plaza West 3090 Olive St Uptown/Turtle Creek 116,891 2006 100% 52,525 $42.00 +E Victory Plaza Bldgs



Veritex Bank Plaza 8214 Westchester Dr Preston Center 96,563 1981 100% 6,047 $36.00 +E Cardinal Capital Partners, Inc.

International Plaza III 14241 Dallas Pky Far North Dallas 354,182 2002 86% 82,924 $35.00 +E Lincoln Property Company

NNN BUILDINGS

Texas Capital Bank Building 2000 McKinney Ave Uptown/Turtle Creek 447,595 2008 98% 20,539 $40.50 NNN Lincoln Property Company

17Seventeen McKinney 1717 McKinney Ave Uptown/Turtle Creek 361,524 2010 99% 25,701 $40.00 NNN Granite Properties, Inc.



Rosewood Court 2101 Cedar Springs Rd Uptown/Turtle Creek 405,291 2008 97% 54,108 $36.50 NNN Rosewood Property Company








RESEARCHERS:



77

20

30

30

308080

820

820

820

DNT

DNT

LLT

LLT

45

45

75

75

1709

12

12

12

12

12

12

12

635

635

408

161

161

161

114

121

121

121

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1212499

303

352

190

190

190

78

78

66

205

183

183

183

183

67

67

67

360

377

377

377

380

380

380

199

287

287

287B

287B

35

35E

35W

35E

35W

35E

35W

35E35W

30

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35W

67

67

377

288

114

20

20635

20

20

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287

81

175

26

20820

20

175

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DNT

380

114

183

DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTER

WINGREN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10










931m SF 12.9% Vac UC = 296.4K SF $ 21.63 PSF 317.6m SF 15.4% Vac UC = 10,945K SF $ 24.02 PSF


Stemmons Freeway


688 Bldgs

56 Bldgs

506 Bldgs

362 Bldgs

152 Bldgs

171 Bldgs

109 Bldgs

4,256 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

90 Bldgs

Total Market

155 Bldgs

106 Bldgs

312 Bldgs

578 Bldgs

82 Bldgs

327 Bldgs

197 Bldgs

269 Bldgs

96 Bldgs






Strong Job Growth Propels Construction, but Vacancy Rate Leveling Off




Despite the mild winter, the Dallas-Fort Worth office market experienced a bit of a cool down in 2016. The market saw a substantial slowdown in net absorption, down 67% from 2015, but leasing activity was only down slightly from a year prior.

Record construction continues to be a top story in the Dallas-Fort Worth market. At the end of Q1 2016, over 10 million square feet was under construction, of which 87% was Class A product. Notable projects that broke ground in Q1 2016 include Park District and Liberty Mutual’s Legacy West Campus. Construction is concentrated around the southern part of Uptown and around the intersection of Highway 121 and the Dallas North Tollway. Corporate relocations and consolidations are flocking to North Plano and South Frisco, while tenants in the new Uptown projects include financial services companies and law firms. Properties constructed after 2015 in Dallas-Fort Worth have a high occupancy rate, 72.2% for Q1 2016, compared with 71% nationwide.

Dallas-Fort Worth added 12,000 jobs so far in 2016, with gains coming from the trade, transportation, utilities, financial services, education and health services sectors. With low oil prices, jobs continue to be lost in construction and mining, but this sector only accounts for 5.7% of the Dallas-Fort Worth economy. Fort Worth, whose employment is more closely tied to the energy industry, saw uneven job growth in the past few months, but added jobs in February. DFW continues to outperform the nation, with jobs growing 3.9% over the prior year, compared with 2.0% growth for the U.S.

A Look Ahead> Expect rental rates to continue a steady rise of about 1% per

quarter, as vacancy market-wide is still below historical rates.> As tenants leave the Dallas CBD for Uptown/Turtle Creek,

landlords are likely to try creative ways to add amenities and increase parking ratios in order to compete.

> Investors will focus on core and core-plus product in the CBDs and Dallas North Tollway to provide safe returns as concerns about slowing global market increase.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 15.3% 16.1% 15.7%






Average $23.97 $27.93 $20.26




AnnualChange

Quarterly Change

2nd Qtr. Forecast*

VACANCY

NET ABSORPTION

UNDER CONSTRUCTION

RENTAL RATE

*Projected





Market Highlights> Dallas continues to be near the top of the nation in job growth. In 2015, Dallas had the

third highest rate of job growth, trailing only New York and Los Angeles.> Overall vacancy has held steady in the low 15% range for the past seven quarters;

however, rental rates continue to rise as tenants seek premium Class A product. > Redevelopment in the Dallas CBD has been ramping up the past few years. Instead

of demolishing historic buildings, there has been a resurgence in redevelopment with projects such as the renovation of the Dallas High School, Landmark Center, and Factory Six 03 in the West End.

Vacancy RateVacancy in DFW has leveled off and started to rise. At the end of Q1 2016, vacancy was 15.3%, rising a marginal 0.2% from Q4 2015. This rate is down 0.1% from a year prior. The vacancy rate has hovered in the low-15% range since Q4 2014, after dropping from a high of 18.4% in 2010. Uptown/Turtle Creek eclipsed Preston Center as the submarket with the lowest vacancy rate at 8.8%, compared with Preston Center’s 9.0%. South Fort Worth’s Class A vacancy rate of 3.2% was the lowest of any market with more than 10 buildings. LBJ Freeway had the highest vacancy rate of a market larger than 5 million square feet at 24.4%.

Absorption & DemandAfter high levels of absorption in 2015, which had not been in the last decade, Q1 saw a slowdown in new space occupied with only 688,883 SF absorbed. This was the lowest quarterly absorption since Q4 2013, which seems to signal a slowdown in the DFW market, as preceded by a slowdown in leasing activity in Q1 2015. Absorption in Class A product accounted for 406,032 SF of absorption and Class B product contributed 412,841 SF, while new vacancies in Class C product subtracted 129,990 from the absorption total.

Las Colinas had the highest level of absorption at 466,683 SF, of which 7-Eleven’s move to its new headquarters at 3200 Hackberry Rd contributed 325,000 SF. Dallas CBD has the most negative absorption, with 348,252 SF, due in part to 7-Eleven’s vacancy of its space in One Arts Plaza, and Locke Lord leaving its 176,000 SF in Chase Tower.

Rental RatesRental rates continued their upward trend in Q1 2016, reaching an average of $23.97 PSF. Class A spaces averaged $27.93 and average gross asking rates for Class B spaces topped $20 for the first time. Uptown Class A rates continued to rise, although marginally, to $38.87, but Preston Center’s Class A rates fell slightly to $37.26.

Stemmons Freeway still had the lowest rates, but Class A rates rose 3% to $19.06. Far North Dallas, the site of the booming Legacy area, saw rates continue to climb from $27.17 overall in Q4 2015 to $27.76 in Q1 2016. As the space in Legacy fills up, expect Class A rates to continue to climb from their current average of $32.09.

0%

5%

10%

15%

20%

25%

0

2,500,000

5,000,000

7,500,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Squa

re F

eet

Vaca

ncy

Rate



DFW 4.1% 3.7%

Texas 4.3% 4.5%

U.S. 5.6% 5.1%


# of Jobs Added

DFW 3.9% 129.9K

Texas 1.6% 185K

U.S. 2.0% 2,778K



0%

5%

10%

15%

20%

25%

0

2,500,000

5,000,000

7,500,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


Squa

re F

eet

Vaca

ncy

Rate

$20

$21

$22

$23

$24

$25

$26

$27

$28

$29

14%

15%

16%

17%

18%

19%

2008 2010 2012 2014 2016


-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

2012 2013 2014 2015 2016





EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT


QUARTERLY AND ANNUAL HISTORICAL COMPARISONS5131Q 6102 ,692,3894,214 14.6% 0.8% 48,415,180 15.3% 15.1% 688,883 1,638,422 10,822,367688,883 $ 23.97

4134Q 5102 ,053,9674,196 14.4% 0.7% 47,465,641 15.1% 15.2% 6,359,550 6,582,075 9,847,2931,480,083 $ 23.59

2133Q 5102 ,684,3034,187 14.5% 0.7% 47,576,060 15.2% 15.1% 4,879,467 5,212,411 7,539,1271,054,430 $ 23.14

0132Q 5102 ,854,3594,170 14.2% 0.9% 46,800,546 15.1% 15.4% 3,825,037 3,382,467 7,776,4561,743,498 $ 22.45

0131Q 5102 ,007,9664,160 14.5% 0.9% 47,697,651 15.4% 15.4% 2,081,539 2,536,074 6,691,0802,081,539 $ 22.09

4031Q 4102 ,178,4234, 84%9.0%1.51680 ,456,647 15.9% 16.3% 1,501,836 363,249 7,380,7091,501,836 $ 21.14

1031Q 3102 ,962,0074,048 15.7% 0.8% 49,984,903 16.6% 16.5% 336,580 521,711 2,658,314336,580 $ 19.85

9921Q 2102 ,773,2614,018 16.3% 0.7% 50,708,470 16.9% 17.0% 394,551 300,889 2,109,634394,551 $ 19.77


5,914,24617 13.1% 0.6% 810,213 13.7% 13.0% (41,275) 0 280,489(41,275) $29.23Fort Worth CBD

106,226,992459 13.9% 0.8% 15,659,505 14.7% 14.4% 815,528 1,403,924 8,391,334815,528 $28.69Dallas Suburban

4,166,05922 13.5% 0.1% 568,541 13.6% 13.4% (12,139) 0 409,232(12,139) $25.98Fort Worth Suburban

139,251,146523 15.3% 0.8% 22,358,156 16.1% 15.5% 406,032 1,403,924 9,423,934406,032 $27.93Total DFW Market


4,068,05043 7.5% 0.0% 304,811 7.5% 6.8% (27,732) 0 0(27,732) $19.51Fort Worth CBD

124,780,1682,223 14.6% 1.0% 19,443,340 15.6% 15.8% 415,575 191,044 1,100,909415,575 $20.34Dallas Suburban


149,032,0212,611 14.9% 0.9% 23,460,589 15.7% 15.9% 412,841 234,498 1,398,433412,841 $20.26Total DFW Market


747,55424 5.4% 0.0% 40,000 5.4% 6.2% 6,278 0 06,278 $15.82Fort Worth CBD

18,828,877798 10.8% 0.0% 2,043,764 10.9% 10.5% (72,715) 0 0(72,715) $16.10Dallas Suburban


27,409,2221,080 9.4% 0.0% 2,596,435 9.5% 9.0% (129,990) 0 0(129,990) $16.55Total DFW Market


10,729,85084 10.5% 0.3% 1,155,024 10.8% 10.2% (62,729) 0 280,489(62,729) $26.21Fort Worth CBD

249,836,0373,480 14.0% 0.9% 37,146,609 14.9% 14.8% 1,158,388 1,594,968 9,492,2431,158,388 $23.94Dallas Suburban


315,692,3894,214 14.6% 0.8% 48,415,180 15.3% 15.1% 688,883 1,638,422 10,822,367688,883 $23.97Total DFW Market



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A

558,150,7yawsserpxE lartneC 22 14.5% 0.3% 1,042,536 14.8% 19.0% 293,903 0 0293,903 $ 28.53

948,349,22DBC sallaD 25 22.4% 0.8% 5,319,897 23.2% 21.6% (356,082) 0 342,879(356,082) $ 25.92

064,041sallaD tsaE 00694,1%6.71%5.61181,32%0.1%5.512 1,496 $ 34.43

017,656,03sallaD htroN raF 411,661,5317,734826,261%8.11%5.21288,148,3%9.0%6.11541 162,628 $ 32.09

642,419,5DBC htroW troF 984,0820)572,14(%0.31%7.31312,018%6.0%1.3171 (41,275) $ 29.23

544,946,81saniloC saL 381,245912,664197,714%8.31%7.31690,065,2%7.1%0.2167 417,791 $ 27.01

378,536,01yaweerF JBL 00208,811%0.62%9.42951,546,2%7.0%2.4263 118,802 $ 24.51


066,528,7seitiC-diM 39 14.3% 1.3% 1,223,513 15.6% 14.1% (119,033) 0 198,000(119,033) $ 26.06

772,115htroW troF htroN 000%0.0%2.62528,331%0.0%2.622 0 N/A

703,593htroW troF tsaehtroN 000%3.4%6.38016,033%0.0%6.382 0 $ 21.43

195,771,4retneC notserP 752,6810)058,02(%5.7%0.8074,333%5.0%5.722 (20,850) $ 37.26


574,952,3htroW troF htuoS 232,9040)931,21(%8.2%2.3601,401%2.0%0.381 (12,139) $ 29.54


167,486,3yaweerF snommetS 000,36049%3.71%3.71346,736%0.0%3.7101 94 $ 19.06

Uptown / Turtle Creek 9,837,833 324,715,10075,39%8.9%9.8627,478%1.0%8.814 93,570 $ 38.87

641,152,931tekraM WFD latoT 523 15.3% 0.8% 22,358,156 16.1% 15.5% 406,032 1,403,924 9,423,934406,032 $ 27.93

Class B

666,249,5yawsserpxE lartneC 000,530078,6%0.01%9.9217,785%3.0%6.948 6,870 $ 22.30

329,238,5DBC sallaD 00443,71%8.22%5.22259,213,1%1.0%4.2253 17,344 $ 20.33

433,731,7sallaD tsaE 005,990)349,02(%5.8%8.8406,826%2.0%6.8581 (20,943) $ 19.87

020,361,12sallaD htroN raF 382 12.9% 1.6% 3,076,992 14.5% 13.9% (122,510) 15,272 237,592(122,510) $ 21.93

050,860,4DBC htroW troF 00)237,72(%8.6%5.7118,403%0.0%5.734 (27,732) $ 19.51

416,141,81saniloC saL 000,8510276,25%9.31%7.31673,674,2%1.0%5.31822 52,672 $ 20.81

400,000,11yaweerF JBL 00)301,93(%5.32%9.32361,426,2%4.0%4.32031 (39,103) $ 17.71


572,899,81seitiC-diM 945,601968,26158,111%3.61%0.61307,830,3%3.3%7.21644 111,851 $ 19.76

289,211,3htroW troF htroN 226,201454,34201,65%4.7%9.6998,312%8.0%1.636 56,102 $ 23.44

Northeast Fort Worth 3,043,689 000,2810)784,91(%6.23%3.33920,210,1%6.0%6.2394 (19,487) $ 15.14

791,228retneC notserP 00)719,2(%5.01%9.01904,98%0.0%9.0171 (2,917) $ 28.66


902,491,8htroW troF htuoS 209,210)169,82(%0.41%3.41855,371,1%1.0%2.41891 (28,961) $ 20.84

601,448,2sallaD tsewhtuoS 591,530)186,61(%4.21%0.31773,073%0.0%0.3158 (16,681) $ 17.37

709,170,8yaweerF snommetS 00)262(%6.72%6.72967,622,2%8.0%8.6299 (262) $ 15.47

Uptown / Turtle Creek 2,476,004 000,0020761,45%8.01%6.8582,312%2.0%4.844 54,167 $ 33.93

Total DFW Market 149,032,021 334,893,1894,432148,214%9.51%7.51985,064,32%9.0%9.41116,2 412,841 $ 20.26



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class C


258,512,3DBC sallaD 00)415,9(%6.2%9.2996,49%3.0%6.264 (9,514) $ 19.26

557,407,2sallaD tsaE 00)579,72(%7.9%7.01762,982%0.0%7.01121 (27,975) $ 15.27

320,090,1sallaD htroN raF 00852,1%8.1%7.1428,81%0.0%7.164 1,258 $ 13.48

455,747DBC htroW troF 00872,6%2.6%4.5000,04%0.0%4.542 6,278 $ 15.82

594,340,1saniloC saL 00)087,3(%8.8%1.9722,59%0.0%1.902 (3,780) $ 16.83

945,806yaweerF JBL 00)895,1(%2.52%5.52822,551%0.0%5.5292 (1,598) $ 18.59

766,798,1notneD / ellivsiweL 00)148,2(%2.6%4.6731,121%0.0%4.657 (2,841) $ 18.57

761,615,4seitiC-diM 00)539,4(%6.21%7.21607,375%0.0%7.21891 (4,935) $ 14.76

803,394htroW troF htroN 00)003,2(%3.4%8.4565,32%0.0%8.472 (2,300) $ 18.69

Northeast Fort Worth 1,045,690 00)762,3(%9.5%2.6212,56%0.0%2.693 (3,267) $ 17.12

923,053retneC notserP 00)312,33(%6.7%1.71937,95%0.0%1.7151 (33,213) $ 29.11


149,770,3htroW troF htuoS 00)274,84(%1.9%7.01591,923%0.0%7.01641 (48,472) $ 18.10

534,812,1sallaD tsewhtuoS 00)741(%5.21%5.21832,251%0.0%5.2126 (147) $ 17.46



222,904,72tekraM WFD latoT 00)099,921(%0.9%5.9534,695,2%0.0%4.9080,1 (129,990) $ 16.55

All Classes

Central Expressway 13,940,167 000,530341,892%1.41%0.21073,176,1%3.0%7.11451 298,143 $ 26.28

426,299,13DBC sallaD 106 20.4% 0.6% 6,727,548 21.0% 19.9% (348,252) 0 342,879(348,252) $ 25.03

945,289,9sallaD tsaE 005,990)224,74(%0.9%4.9250,149%1.0%3.9803 (47,422) $ 18.89

357,909,25sallaD htroN raF 607,304,5589,254673,14%4.21%1.31896,739,6%2.1%9.11375 41,376 $ 27.76

058,927,01DBC htroW troF 984,0820)927,26(%2.01%8.01420,551,1%3.0%5.0148 (62,729) $ 26.21

455,438,73saniloC saL 324 12.7% 0.9% 5,131,699 13.6% 13.7% 466,683 466,219 700,183466,683 $ 23.79

624,442,22yaweerF JBL 00101,87%7.42%4.42055,424,5%5.0%9.32591 78,101 $ 20.98


201,043,13seitiC-diM 945,403968,26)711,21(%2.51%4.51229,538,4%3.2%1.31386 (12,117) $ 21.76

765,711,4htroW troF htroN 226,201454,34208,35%4.9%0.9982,173%6.0%4.829 53,802 $ 22.87

Northeast Fort Worth 4,484,686 000,2810)457,22(%9.03%4.13158,704,1%4.0%0.1309 (22,754) $ 17.37

711,053,5retneC notserP 752,6810)089,65(%0.8%0.9816,284%4.0%6.845 (56,980) $ 35.70


526,135,41htroW troF htuoS 431,2240)275,98(%4.01%1.11958,606,1%1.0%9.01263 (89,572) $ 22.03

245,663,4sallaD tsewhtuoS 591,530)828,61(%9.11%3.21511,835%0.0%3.21051 (16,828) $ 17.54

Stemmons Freeway 13,745,428 000,360)748,11(%8.22%9.22640,641,3%5.0%4.22961 (11,847) $ 16.01

Uptown / Turtle Creek 12,801,037 324,717,10211,151%0.01%8.8184,421,1%1.0%6.8801 151,112 $ 37.70

Total DFW Market 315,692,3894,214 14.6% 0.8% 48,415,180 15.3% 15.1% 688,883 1,638,422 10,822,367688,883 $ 23.97



350 Highland Dr* Lewisville 120,910 Mortgage Contracting Services Feb-16

2021 McKinney Ave Uptown/Turtle Creek 115,000 Gardere Mar-16

300 W Las Colinas Blvd Urban Center/Wingren 100,000 Ethos Group, Inc. Mar-16

2201 W Plano Pky Plano 75,825 PennyMac Financial Services Mar-16

1607 Lyndon B Johnson Fwy DFW Freeport/Coppell 60,827 Telvista Jan-16

4609 Regent Blvd DFW Freeport/Coppell 52,311 WageWorks Feb-16

125 E John Carpenter Fwy Urban Center/Wingren 36,268 Fresenius Medical Care Feb-16

5160 Tennyson Pky Upper Tollway/West Plano 34,200 Benchmark Mortgage Company Feb-16

8951 Cypress Waters Blvd DFW Freeport/Coppell 32,392 Morgan Stanley Mar-16

2201 W Plano Pky Plano 26,289 Rug Doctor Mar-16

Leasing Activity

Leasing activity for the last 12-months ending March 31, 2016 totaled 21.6 million SF. This rate is down only slightly from 2015’s leasing total of 22.1 million square feet. Average deal size over the last four quarters was about 5,400 SF, which is larger than the average deal size of 4,900 SF over the last five years.



Occidental Tower* LBJ Freeway 549,170 1986 Encore Enterprises, Inc. Occidental Petroleum Corporation $87,500,000 $159 1/29/2016

Saint Paul Place Dallas CBD 273,080 1983/07 Quadrant Investment Group Goddard Investement Group $52,000,000 $190 2/22/2016

Intellicenter - Dallas Las Colinas 200,079 2007 The Aztec Fund Priudential $40,000,000 $200 3/14/2016

Landmark Center Dallas CBD 133,909 1913 Spear Street Capital Foundry Capital Partners $26,700,000 $199 1/8/2016

Park West Commerce Center Las Colinas 150,000 1998 Texas Capitalization

Resource Group, Inc. Brandywine Realty Trust $23,535,000 $157 1/29/2016

One Glen Lakes Central Expressway 170,000 1981 Cawley Management, LLC Eland Energy Inc $17,500,000 $103 2/29/2016

Las Colinas Commons Las Colinas 239,379 1979/81 David Tessel Behringer $14,362,740 $60 2/2/2016

7610 Stemmons Fwy Stemmons Freeway 127,381 1981 Good Signature

Management Tri Tower Financial Group $4,331,000 $34 2/4/2016

Sales Activity

Activity in the office investment market was brisk with 18 building sales each with over 100,000 square feet, and an average sales price per square foot of $168 and average cap rate of 7.0%.

* Colliers Transaction

* Colliers Transaction


SOUTH FORT WORTH 422K SF

LAS COLINAS 700K SF




TOTA

L: 1

0.8M

SF

15.3% 690K SFVACANCY NET ABSORPTION


Q1 2016 HIGHLIGHTS


ANNUALLY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF 50

0K-1

M S

F 1 MIL

LION

+ SF


VACANCY

65423.2M SF

16.7%

48834.6M SF

20.3%

44869.1M SF

19.6%

12344.8M SF

19.4%

2919.0M SF

24.7%

1418.6M SF

23.8%

139.3M SF149.0M SF

27.4M SF

UNDERCONSTRUCTION

SUBMARKET SF

Quoted gross rental rates for existing top performing office buildingsBUILDING NAME+ ELECTRIC BLDGS. ADDRESS SUBMARKET RBA (SF) YEAR

BUILT%



Advancial Tower 1845 Woodall Rodgers Fwy Uptown/Turtle Creek 149,815 1984 83% 26,285 $36.50 +E Karns Commercial Real Estate

The Centrum 3102 Oak Lawn Ave Uptown/Turtle Creek 391,473 1987 79% 160,904 $36.00 +E Quadrant Capital

8300 Douglas at Preston Center

8300 Douglas Ave Preston Center 99,773 1982 83% 70,841 $35.94 +E Lionstone Investments

The Urban Towers 222 W Las Colinas Blvd Las Colinas 848,591 1982 95% 130,511 $34.50 +E Parallel Capital Partners, Inc.

Chase Tower 2200 Ross Ave Dallas CBD 1,255,473 1987 79% 315,223 $34.50 +E Hines

NNN Buildings

Texas Capital Bank Building 2000 McKinney Ave Uptown/Turtle Creek 447,595 2008 100% 20,539 $40.50 NNN Lincoln Property Company




1900 Pearl 1900 N Pearl St Dallas CBD 261,400 2017 0% 261,400 $36.00 NNN Lincoln Property Company








RESEARCHERS:



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820

820

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DNT

DNT

LLT

LLT

45

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75

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1709

12

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12

635

635

408

161

161

161

114

121

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303

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190

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78

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66

205

183

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360

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199

287

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35

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30

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35W

67

67

377

288

114

20

20635

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175

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DNT

380

114

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DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTER

WINGREN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10


1 1013.9m SF 12% Vac UC = 35K SF $ 26.28 PSF 4.1m SF 9% Vac UC = 102.6K SF $ 22.87 PSF

2 1132m SF 21% Vac UC = 342.9K SF $ 25.03 PSF 4.5m SF 31.4% Vac UC = 182K SF $ 17.37 PSF

3 1210m SF 9.4% Vac UC = 99.5K SF $ 18.89 PSF 5.4m SF 9% Vac UC = 186.3K SF $ 35.70 PSF








Stemmons Freeway


683 Bldgs

54 Bldgs

496 Bldgs

362 Bldgs

150 Bldgs

169 Bldgs

108 Bldgs

4,214 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

90 Bldgs

Total Market

154 Bldgs

106 Bldgs

308 Bldgs

573 Bldgs

84 Bldgs

324 Bldgs

195 Bldgs

266 Bldgs

92 Bldgs






DFW Office Market Continues Its Strong Run



Mike Otillo Director of Market Research | Dallas/Fort Worth

If casual observers had any concerns that the Dallas Fort Worth office market might begin to show signs of slowing down in Q3 2015, they can lay those fears to rest. With vacancy rates continuing to decline while average rental rates steadily rise; the Dallas Fort Worth office market could comfortably be described as robust. Vacancy rates, which were hovering around 15.2% in Q2 2015, dropped down to 14.9% in Q3 2015. Solid absorption is bringing vacancies down to levels not seen in many years. Construction levels are on the rise with many new Class A building projects under construction or breaking ground in the next quarter, adding to the already-existing 311,630,890 square feet that was available on the market as of Q3 2015.

According to the Dallas Federal Reserve Bank, demand for office space was solid in Dallas-Fort Worth, while some other Texas markets, including Houston, showed slowing in leasing activity and further increases in the level of sublease space. Commercial loan growth also remained positive in the Dallas Fort Worth market, further amplifying the positive trends in the Dallas office market.

The area’s unemployment rate dropped to 3.9 percent in August 2015, which is 1.3% less than this time last year. Over the past 12 months, the metroplex is responsible for creating 81% of all new jobs in the state of Texas.

A Look Ahead

> Market rents will continue to rise with some tapering expected towards the end of the year as new buildings come to the market.

> Preston Center and Uptown still lead the rental rate race, averaging $35.90 and $36.47 PSF, respectively.

> Lower rental rates relative to other large metros, low unemployment, and continued increase in population will keep the DFW office market strong for many years ahead.

Market Highlights

> Vacancy rates continue to decline across all property types, encouraging developers to break ground on new projects.

> This is the first time that vacancy rates have fallen below 15% in over a decade.

> Rental rates in the Class A sector saw a huge spike this quarter as demand for Class A space is at a market high.


DFW Market

DFW Class A

DFW Class B

Vacancy Rate 14.9% 14.6% 16.2%


Absorption (Thousand Square Feet) 5,611 3,837 1,394

New Construction (Thousand Square Feet) 5,151 3,996 1,155

Under Construction (Thousand Square Feet) 6.7 6.2 0.5


Average $23.13 $27.09 $19.46




AnnualChange

Quarterly Change

4th Quarter Forecast*

VACANCY

NET ABSORPTION

UNDER CONSTRUCTION

RENTAL RATE

*Projected






Vacancy Rate

The DFW vacancy rate continues to decline to rates not seen in the metroplex since 2001. The current rate of 14.9% is down from 15.2% at the Q2 2015. This is a drop of almost two entire percentage points from where vacancy rates hovered less than two years ago.

Contributing to the decrease were the following four submarkets with the lowest vacancy rates in the metroplex; Preston Center (7.1%), North Fort Worth (9.1%), East Dallas (9.2%), and Uptown/Turtle Creek (9.7%).


Absorption & Demand

The overall absorption in Q3 2015 was at 1,610,312 SF, bringing the YTD total for absorption in the Dallas Fort Worth office market to 5,610,779 SF. Leading the charge in absorption this past quarter was the Far North Dallas submarket with 501,522 SF, followed by the North Fort Worth submarket with 402,217 SF. The only two local submarkets with negative absorption in Q3 were North US 75 Corridor (-563,552 SF) and Southwest Dallas (-20,437 SF).

Class A absorption also remained stable, with only two Class A submarkets seeing negative absorption, LBJ Freeway with -23,135 SF and South Fort Worth at -10,106 SF. This brings the YTD absorption for Class A office space in the market to 841,617 SF.

Rental Rates

DFW office rental rates averaged out to $23.13 PSF in Q3 2015, with $27.09 being the average rental rate for Class A space and $19.46 PSF being the average rental rate for Class B space. As has been the case in the past dozen quarters, rental rates in the Uptown submarket have matched the incredible demand with average rental rates for Class A properties around $38.27 PSF and Class B properties at $31.42 PSF.

The Stemmons Freeway Class A market showed the lowest average rental rates, with numbers in the area of $17.57 PSF. Class B office space in the Stemmons submarket averaged out at $14.86 PSF, the lowest average of any submarket in the area. These bargain prices make the Stemmons market particularly susceptible to developers.


DFW 5.2% 3.9%

Texas 5.3% 4.4%

U.S. 6.3% 5.2%


# of Jobs Added

DFW 1.4% 48.8K

Texas 0.5% 60.0K

U.S. 1.8% 2,581.0K



0%

5%

10%

15%

20%

25%

0

2,500,000

5,000,000

7,500,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


Squa

re F

eet

Vaca

ncy

Rate

$20

$21

$22

$23

$24

$25

$26

$27

14%

15%

16%

17%

18%

19%

2007 2009 2011 2013 2015


-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

2011 2012 2013 2014 2015


0%

5%

10%

15%

20%

25%

0

2,500,000

5,000,000

7,500,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


Squa

re F

eet

Vaca

ncy

Rate



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT



1133Q 5102 ,630,8904,167 14.3% 0.6% 46,492,974 14.9% 14.9% 5,610,779 5,151,027 6,715,6071,610,312 $ 23.13

9032Q 5102 ,823,9794,152 14.1% 0.8% 46,296,375 14.9% 15.3% 4,000,467 3,344,116 7,018,4641,876,035 $ 22.44

8031Q 5102 ,988,3044,143 14.5% 0.8% 47,336,735 15.3% 15.3% 2,124,432 2,508,441 6,404,2172,124,432 $ 22.08

6034Q 4102 ,479,8634,121 14.5% 0.8% 46,952,726 15.3% 15.4% 6,039,626 3,643,919 8,212,8631,145,930 $ 21.95

5033Q 4102 ,545,4954,110 14.6% 0.8% 47,164,288 15.4% 16.0% 4,893,696 2,709,551 6,938,2052,569,293 $ 21.50

2033Q 3102 ,281,6574,053 15.4% 0.8% 48,812,278 16.1% 16.6% 2,491,801 1,768,591 5,182,5442,129,360 $ 20.44

0033Q 2102 ,250,7984,018 15.8% 0.7% 49,757,876 16.6% 16.9% 2,398,791 1,703,488 2,380,7651,387,516 $ 19.76

8923Q 1102 ,506,8763,995 16.6% 0.6% 51,486,175 17.2% 17.5% 1,853,785 715,396 1,791,070867,226 $ 19.43


5,914,24617 13.2% 0.6% 816,346 13.8% 15.1% 205,336 0 077,113 $28.37Fort Worth CBD

102,683,806443 12.8% 0.7% 13,857,768 13.5% 13.5% 2,954,318 3,140,878 5,727,344341,150 $27.30Dallas Suburban


135,772,256507 13.9% 0.7% 19,844,031 14.6% 14.4% 3,837,258 3,995,729 6,223,576841,617 $26.60Total DFW Market


3,381,90342 7.5% 0.0% 254,327 7.5% 7.5% 33,231 0 0479 $19.65Fort Worth CBD

125,535,9212,209 15.3% 0.8% 20,215,745 16.1% 16.2% 849,844 731,590 492,031497,541 $19.24Dallas Suburban

14,186,006308 16.0% 0.3% 2,325,651 16.4% 17.1% 407,740 423,708 0114,430 $19.68Fort Worth Suburban

148,975,8982,594 15.5% 0.7% 24,200,346 16.2% 16.4% 1,393,949 1,155,298 492,031639,331 $19.28Total DFW Market


757,09124 9.0% 0.0% 68,278 9.0% 8.7% 10,624 0 0(2,778) $15.54Fort Worth CBD

18,214,414781 10.3% 0.0% 1,873,307 10.3% 10.9% 271,849 0 0112,454 $15.53Dallas Suburban


26,882,7361,066 9.1% 0.0% 2,448,597 9.1% 9.6% 379,572 0 0129,364 $15.88Total DFW Market


10,053,24083 11.0% 0.3% 1,138,951 11.3% 12.1% 249,191 0 074,814 $26.30Fort Worth CBD

246,434,1413,433 13.9% 0.7% 35,946,820 14.6% 14.7% 4,076,011 3,872,468 6,219,375951,145 $22.82Dallas Suburban


311,630,8904,167 14.3% 0.6% 46,492,974 14.9% 14.9% 5,610,779 5,151,027 6,715,6071,610,312 $22.85Total DFW Market



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class C

Central Expressway 928,58747 4.4% 0.0% 40,404 4.4% 4.4% (19,053) 0 00 $ 23.47

Dallas CBD 3,192,85245 2.8% 0.0% 90,802 2.8% 3.1% 19,742 0 07,321 $ 15.68

East Dallas 2,381,684113 10.5% 0.0% 250,335 10.5% 11.5% 22,476 0 024,430 $ 15.16

Far North Dallas 1,087,73145 4.4% 0.0% 48,067 4.4% 7.1% 32,098 0 029,001 $ 13.11

Fort Worth CBD 757,09124 9.0% 0.0% 68,278 9.0% 8.7% 10,624 0 0(2,778) $ 15.54

Las Colinas 1,072,09021 10.2% 0.0% 108,827 10.2% 14.4% 54,786 0 045,436 $ 17.23

LBJ Freeway 633,91831 23.7% 0.0% 150,166 23.7% 18.7% (45,446) 0 0(31,464) $ 15.80

Lewisville / Denton 1,859,34673 5.6% 0.0% 104,961 5.6% 5.9% 45,549 0 04,437 $ 18.56

Mid-Cities 4,503,537197 11.5% 0.0% 517,331 11.5% 11.7% 97,295 0 011,649 $ 13.91

North Fort Worth 540,14428 8.4% 0.0% 45,227 8.4% 7.9% 131 0 0(2,500) $ 17.65

Northeast Fort Worth 1,067,05840 8.0% 0.0% 85,049 8.0% 9.2% 17,772 0 013,250 $ 15.18

Preston Center 381,04916 2.8% 0.0% 10,526 2.8% 3.1% 1,542 0 01,147 $ 23.43

North US 75 Corridor 1,891,72098 10.2% 0.0% 193,138 10.2% 9.7% 28,873 0 0(9,739) $ 15.00

South Fort Worth 3,111,177148 9.2% 0.0% 285,934 9.2% 9.2% 59,454 0 01,617 $ 17.77

Southwest Dallas 1,199,79561 12.9% 0.0% 154,454 12.9% 12.6% 31,269 0 0(3,697) $ 17.63

Stemmons Freeway 1,783,38256 14.3% 0.0% 255,616 14.3% 16.6% 22,460 0 041,254 $ 13.37

Uptown / Turtle Creek 491,57523 8.0% 0.0% 39,482 8.0% 8.0% 0 0 00 $ 23.92

Total DFW Market 26,882,7361,066 9.1% 0.0% 2,448,597 9.1% 9.6% 379,572 0 0129,364 $ 15.88

All Classes


Dallas CBD 32,088,077105 19.5% 0.5% 6,442,078 20.1% 19.2% 409,159 459,383 87,00095,929 $ 23.37

East Dallas 9,749,806300 9.1% 0.1% 895,511 9.2% 10.1% 150,360 20,773 18,309112,064 $ 18.88

Far North Dallas 51,601,250558 11.2% 0.6% 6,092,151 11.8% 11.9% 1,117,852 706,012 2,923,446501,522 $ 26.65

Fort Worth CBD 10,053,24083 11.0% 0.3% 1,138,951 11.3% 12.1% 249,191 0 074,814 $ 26.44

Las Colinas 37,192,488325 13.9% 1.0% 5,558,242 14.9% 15.5% 216,509 354,185 681,219219,905 $ 23.62

LBJ Freeway 22,240,658196 24.0% 0.3% 5,400,011 24.3% 24.4% 121,602 0 036,881 $ 20.03

Lewisville / Denton 10,226,000263 13.3% 0.1% 1,370,387 13.4% 13.3% 77,063 135,587 063,140 $ 21.74

Mid-Cities 31,067,056672 12.3% 2.4% 4,556,054 14.7% 14.9% 264,816 191,500 150,497187,691 $ 19.77

North Fort Worth 4,092,92190 8.4% 0.7% 373,178 9.1% 10.6% 568,807 605,493 0402,217 $ 21.77

Northeast Fort Worth 4,388,36089 22.7% 0.3% 1,011,806 23.1% 24.6% 118,575 0 066,138 $ 15.93

Preston Center 5,409,14956 6.7% 0.4% 382,422 7.1% 6.8% 176,890 190,000 171,583163,611 $ 35.90

North US 75 Corridor 34,047,720484 14.2% 0.1% 4,885,496 14.3% 12.7% 1,010,023 1,587,638 1,402,991(563,552) $ 21.24

South Fort Worth 14,574,151367 10.8% 0.0% 1,580,141 10.8% 10.7% 189,036 213,683 409,23220,069 $ 22.85

Southwest Dallas 4,342,091149 11.4% 0.0% 494,292 11.4% 10.9% 50,404 75,000 0(20,437) $ 17.57

Stemmons Freeway 13,862,667168 20.6% 0.7% 2,957,687 21.3% 22.2% 236,000 0 0120,702 $ 15.48

Uptown / Turtle Creek 12,732,733108 9.4% 0.4% 1,238,780 9.7% 10.1% 429,366 404,732 871,33043,034 $ 36.47

Total DFW Market 311,630,8904,167 14.3% 0.6% 46,492,974 14.9% 14.9% 5,610,779 5,151,027 6,715,6071,610,312 $ 23.13



EXISTING PROPERTIES


InventorySF

CONSTRUCTION

DirectVacancy

Rate

TotalVacant

SF

SubleaseVacancy

Rate

New SupplyYTDSF

UnderConstruction

SF


AverageRate(FS)

Net AbsYTDSF

Net AbsCurrent Qtr

SF

Vacancy Rate

Current

Vacancy Rate

Prior Qtr

RENT

Class A


Dallas CBD 23,023,15725 20.7% 0.8% 4,946,653 21.5% 20.2% 286,283 459,383 87,00061,727 $ 24.28

East Dallas 140,4602 16.6% 1.0% 24,792 17.7% 16.6% (1,441) 0 0(1,441) $ 34.74

Far North Dallas 29,189,206136 9.2% 0.4% 2,783,845 9.5% 9.5% 693,548 359,918 2,823,136133,416 $ 31.09

Fort Worth CBD 5,914,24617 13.2% 0.6% 816,346 13.8% 15.1% 205,336 0 077,113 $ 28.64

Las Colinas 18,156,27975 13.5% 1.9% 2,790,270 15.4% 16.1% 247,376 340,585 681,219132,426 $ 26.44

LBJ Freeway 10,270,38834 24.0% 0.1% 2,474,151 24.1% 23.9% (19,848) 0 0(23,135) $ 23.23

Lewisville / Denton 474,7556 21.8% 0.0% 103,383 21.8% 0.0% 0 80,964 00 $ 26.47

Mid-Cities 7,756,05338 12.5% 1.8% 1,103,265 14.2% 15.1% 101,190 0 38,00065,967 $ 24.37

North Fort Worth 511,2772 26.2% 0.0% 133,825 26.2% 0.0% 377,452 357,214 0366,810 N/A

Northeast Fort Worth 395,3072 3.1% 0.0% 12,212 3.1% 3.6% 2,127 0 04,923 $ 21.59

Preston Center 4,175,84222 6.7% 0.5% 299,287 7.2% 7.5% 193,946 190,000 171,583190,815 $ 37.40

North US 75 Corridor 11,813,27655 10.4% 0.1% 1,236,507 10.5% 8.0% 1,120,495 1,557,638 1,342,076(288,992) $ 24.25

South Fort Worth 3,244,46318 2.4% 0.0% 77,227 2.4% 0.9% 11,742 38,254 409,232(10,106) $ 29.38

Southwest Dallas 304,0013 6.1% 0.0% 18,403 6.1% 6.1% 222 0 00 $ 21.84

Stemmons Freeway 3,684,65610 16.9% 1.4% 672,934 18.3% 19.1% 82,009 0 029,690 $ 18.65

Uptown / Turtle Creek 9,666,85440 8.8% 0.4% 886,228 9.2% 9.7% 424,828 404,732 671,33048,850 $ 38.27

Total DFW Market 135,772,256507 13.9% 0.7% 19,844,031 14.6% 14.4% 3,837,258 3,995,729 6,223,576841,617 $ 27.09

Class B

Central Expressway 5,981,90085 10.0% 0.2% 610,680 10.2% 10.8% 132,186 0 033,030 $ 19.44

Dallas CBD 5,872,06835 23.9% 0.0% 1,404,623 23.9% 24.4% 103,134 0 026,881 $ 19.52

East Dallas 7,227,662185 8.5% 0.1% 620,384 8.6% 9.6% 129,325 20,773 18,30989,075 $ 19.77

Far North Dallas 21,324,313377 14.4% 0.9% 3,260,239 15.3% 15.6% 392,206 346,094 100,310339,105 $ 21.20

Fort Worth CBD 3,381,90342 7.5% 0.0% 254,327 7.5% 7.5% 33,231 0 0479 $ 19.78

Las Colinas 17,964,119229 14.6% 0.2% 2,659,145 14.8% 15.0% (85,653) 13,600 042,043 $ 20.18

LBJ Freeway 11,336,352131 24.1% 0.4% 2,775,694 24.5% 25.3% 186,896 0 091,480 $ 17.30

Lewisville / Denton 7,891,899184 14.5% 0.2% 1,162,043 14.7% 15.5% 31,514 54,623 058,703 $ 21.01

Mid-Cities 18,807,466437 12.4% 3.2% 2,935,458 15.6% 15.5% 66,331 191,500 112,497110,075 $ 18.93

North Fort Worth 3,041,50060 5.5% 0.9% 194,126 6.4% 6.9% 191,224 248,279 037,907 $ 22.60

Northeast Fort Worth 2,925,99547 30.7% 0.5% 914,545 31.3% 32.9% 98,676 0 047,965 $ 15.94

Preston Center 852,25818 8.3% 0.2% 72,609 8.5% 5.2% (18,598) 0 0(28,351) $ 28.16


South Fort Worth 8,218,511201 14.7% 0.1% 1,216,980 14.8% 15.2% 117,840 175,429 028,558 $ 21.59

Southwest Dallas 2,838,29585 11.3% 0.0% 321,435 11.3% 10.7% 18,913 75,000 0(16,740) $ 17.33

Stemmons Freeway 8,394,629102 23.6% 0.6% 2,029,137 24.2% 24.8% 131,531 0 049,758 $ 14.86

Uptown / Turtle Creek 2,574,30445 11.8% 0.4% 313,070 12.2% 11.9% 4,538 0 200,000(5,816) $ 31.42

Total DFW Market 148,975,8982,594 15.5% 0.7% 24,200,346 16.2% 16.4% 1,393,949 1,155,298 492,031639,331 $ 19.46



2400 N Glenville Dr US 75 Corridor 388,600 Verizon Building Access Jul-15

13155 Noel Rd LBJ Freeway 131,529 Ryan, LLC Jul-15

1445 Ross Ave Dallas CBD 87,803 Hunton & Williams LLP Jul-15

1999 Bryan St Dallas CBD 66,451 U.S. Department of Education Jul-15

8951 Cypress Waters Blvd Las Colinas 62,550 Toyota Industries Commercial Finance, Inc. Jul-15

5600 Clearfork Main St West Southwest Ft Worth 58,713 Smith & Nephew Inc Sep-15

13155 Noel Rd LBJ Freeway 44,601 Ryan, LLC Jul-15

14241 Dallas Pky Far North Dallas 41,940 Excentus Corporation Jul-15

7 Village Cir Mid Cities 37,106 ECHO Locum Tenens Jul-15

2811 Internet Blvd Far North Dallas 36,601 The University of North Texas Sep-15

Leasing Activity

Leasing activity for the 3rd quarter posted close to 4 million square feet of signed deals. This is down 26% from the previous quarter and the year to date totals are down 22% compared to 3rd quarter 2014.


BUILDING NAME SUBMARKET RBA (SF) YEAR BUILT BUYER SELLER SALE PRICE $/SF DATE

SOLD

Galleria Dallas LBJ Freeway 1,418,800 1982 CBREI Cannon Commercial $315,000,000 $222 09/23/15

Energy Square Central Expressway 940,541 1974 GlenStar Properties, LLC

/ USAA Long Wharf / Champion

Partners $145,000,000 $154 07/14/15

2100 Ross Dallas CBD 843,728 1983 Woods Capital Management Cousins Properties Inc. $130,000,000 $154 09/09/15

Ericsson Headquarters Far North Dallas 260,000 2014 US Realty Advisors, Inc. Unknown $100,000,000 $385 07/15/15

Galleria North Tower II Far North Dallas 306,244 2001 Deutsche Asset

& Wealth ManagementMetzler North America

Corporation $71,250,000 $233 07/08/15

Trinity Towers Stemmons Freeway 634,381 1983 JP Realty Partners GE Capital Corporation $54,000,000 $85 08/04/15

2400 North Glenville US 75 Corridor 400,000 1991 Q Investments MCI WorldCom $35,000,000 $88 07/14/15

Richardson Office Center I US 75 Corridor 240,000 1998 Buchanan Street Partners Principal Real Estate

Investors $27,600,000 $115 07/15/15

4455 LBJ Freeway LBJ Freeway 285,420 1980 AmTrust Financial Services Harkinson Investment Corporation $25,000,000 $88 09/08/15

Corporate Park Place Las Colinas 113,427 1980 HI-REIT Fobare Commercial $9,500,000 $84 08/24/15

Sales Activity

Activity in the office investment market was brisk with 21 sales of buildings over 100,000 square feet with an average sales price per square foot of $161.



BUILT%


2323 Victory Ave 2323 Victory Ave Uptown/Turtle Creek 480,815 2008 95% 23,435 $42.00 +E Hines Global REIT, Inc.

Victory Plaza West 3090 Olive St Uptown/Turtle Creek 116,891 2006 100% 68,851 $41.29 +E Victory Plaza Bldgs

2100 McKinney Ave 2100 McKinney Ave Uptown/Turtle Creek 351,858 1998 97% 14,931 $39.00 NNN MetLife, Inc.


17Seventeen McKinney 1717 McKinney Ave Uptown/Turtle Creek 361,524 2010 99% 21,945 $36.00 NNN Granite Properties, Inc.

8300 Douglas at Preston Center 8300 Douglas Ave Preston Center 99,773 1982 91% 67,008 $35.99 +E Lionstone Investments


Veritex Bank Plaza 8214 Westchester Dr Preston Center 96,563 1981 100% 15,676 $35.50 +E Cardinal Capital Partners, Inc.

Williams Square - Central Tower 5215 N O'Connor Blvd Las Colinas 614,527 1984 100% 19,040 $35.50 +E The Brookdale Group

Williams Square - East Tower 5221 N O'Connor Blvd Las Colinas 363,536 1985 100% 10,018 $35.50 +E The Brookdale Group

Note: Avail. SF includes direct and sublet space as well as any future available space listed. Source: CoStar Property

UNDERCONSTRUCTION

6.7M SF14.9% 1.6M SFVACANCY NET ABSORPTION


Q3 2015 HIGHLIGHTS

135.8M SF

CLASS A: 44% CLASS B: 48% CLASS C: 8%

148.9M SF

26.9M SF

TOTAL INVENTORY BY CLASS

Q3 2014 5.6M SFQ4 2014 5.4M SFQ1 201528.6%

ANNUALLY

26.1%QUARTERLY

4.1M SFQ2 2015 5.4M SFQ3 2015 4.0M SF

LEASINGACTIVITY

CURR

ENT

MULTI-TENANT


25K-

50K

SF

50K-

100K

SF

100K

-250

K SF

250K

-500

K SF

500K

-1M

SF

1 MIL

LION

+ SF


65323.1M SF

49334.8M SF

45969.1M SF

13745.1M SF

3018.9M SF

1418.5M SF







RESEARCHERS:



77

20

30

30

308080

820

820

820

DNT

DNT

LLT

LLT

45

45

75

75

1709

12

12

12

12

12

12

12

635

635

408

161

161

161

114

121

121

121

121

1212499

303

352

190

190

190

78

78

66

205

183

183

183

183

67

67

67

360

377

377

377

380

380

380

199

287

287

287B

287B

35

35E

35W

35E

35W

35E

35W

35E35W

30

30

35W

67

67

377

288

114

20

20635

20

20

20

287

81

175

26

20820

20

175

30

DNT

DNT

380

114

183

DENTON

UPPER TOLLWAYPLANO

QUORUMBENT TREE

FRISCOTHE COLONY

ALLEN / McKINNEY

PLANO

RICHARDSON

LEWISVILLE




SOUTH IRVING

SOUTHWEST DALLAS

PRESTON CENTER

SOUTHEAST DALLAS


WHITE ROCK

GARLAND

ROCKWALL

DALLAS CBDFWCBD

UPTOWN /TURTLECREEK

CENTRALEXPWY


WEST LBJ

URBAN CENTERWINTERGREEN





NORTHEASTFORT WORTH

STEMMONSFREEWAY


360

360

EAST LBJ

190

635

8

67

4

13

3

112

17

2

15

169

14

11

5

10


1 1014m SF 15.2% Vac UC = None $ 24.89 PSF 4.1m SF 9.1% Vac UC = None $ 21.77 PSF



4 1351.6m SF 11.8% Vac UC = 2,923K SF $ 26.65 PSF 34m SF 14.3% Vac UC = 1,403K SF $ 21.24 PSF







Total Market

154 Bldgs

105 Bldgs

300 Bldgs

558 Bldgs

83 Bldgs

325 Bldgs

196 Bldgs

263 Bldgs

90 Bldgs

LBJ Freeway

Denton / Lewisville

Mid-Cities

North Fort Worth


Preston Center


South Fort Worth

Southwest Dallas

89 Bldgs

Central Expressway

Dallas CBD

East Dallas

Far North Dallas

Fort Worth CBD

Las Colinas

672 Bldgs

56 Bldgs

484 Bldgs

367 Bldgs

149 Bldgs

168 Bldgs

108 Bldgs

4,167 Bldgs

Stemmons Freeway







Documents

Migration to efficient, pricier space results in down quarter · been the trend for the past six quarters, Class A has seen strong activity, and class B has been lackluster or negative