SEATTLE OFFICE MARKET OVERVIEW THIRD QUARTER 2017 Seattle Office 600 University Street, Suite 2220 Seattle, Washington 98101 broderickgroup.com Commercial Real Estate Services SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 DOWNTOWN SEATTLE OFFICE MARKET STATISTICS Entire Seattle Market Total SF: Vacant SF: Vacant %: Asking Rates: Absorption Qtr: Absorption YTD: 58,669,305 3,869,269 6.60% $36.03/SF, G 1,146,488 SF 2,280,790 SF Qtr Change YTD Change ( +0.38%) ( +$0.04) ( +0.33%) ( +$0.19) # of buildings w/ 50,000 SF or more of contiguous available space within each category Entire Seattle 12 Market Class A Buildings Total SF: Vacant SF: Vacant %: Asking Rates: Absorption Qtr: Absorption YTD: 38,382,026 2,569,990 6.70% $42.12/SF, G 1,019,025 SF 1,889,045 SF Qtr Change YTD Change ( +1.10%) ( +$0.04) ( +0.97%) ( +$0.33) Class A CBD Total SF: 20,118,936 Vacant SF: 1,938,179 Vacant %: 9.63% Asking Rates: $42.95/SF, G Absorption Qtr: 590,661 SF Absorption YTD: 999,623 SF Qtr Change ( +1.66%) ( +$0.12) YTD Change ( +2.46%) ( +$0.47) Class A+ (Top Ten)* Total SF: 8,359,968 Vacant SF: 1,058,277 Vacant %: 12.66% Asking Rates: $ 44.16/SF, G Absorption Qtr: 6 01,577 SF Absorption YTD: 734,014 SF * Qtr Change ( +7.50%) ( +$0.10) YTD Change ( +5.70%) ( -$0.35) Class A Buildin Class A 10 /12 gs 5 / 12 CBD Class A + (Top Ten)* 1201 Third Avenue, 1918 Eighth, 999 Third, Fourth & Madison, Madison Centre, Russell Investments Center, The Mark, Two Union Square, US Bank Centre, West 8th 2 / 12 broderickgroup.com 2 SIGNIFICANT LEASES SEATTLE OFFICE MARKET OVERVIEW Significant Leases Submarket Size (SF) Rainier Square CBD 722,000 Amazon 300 Pine CBD 312,691 Q3 2017 Oracle (Sublease) Russell Investments Center CBD 160,000 Q3 2017 WeWork Fourth & Madison CBD 73,000 Q3 2017 Dorsey & Whitney (Renewal) Columbia Center CBD 68,386 entered into the market with partial vacancies, pre-leasing of new develop- Q3 2017 WeWork Hill7 Denny Regrade 54,336 ments has unwaveringly persisted. Q3 2017 Indeed (Sublease) Russell Investments Center CBD 44,631 The two largest and most notable leases of the Third Quarter 2017 were entire Q3 2017 Textio Madison Centre CBD 22,774 building pre-leases of new developments, and were both executed by Amazon, Q2 2017 F5 Networks F5 Tower (The Mark) CBD 515,000 opment and the 312,691 SF pre-lease of 300 Pine. These leases also show that Q2 2017 Amazon Yale & Thomas Lake Union 161,095 Amazon has begun expanding in the Seattle Market beyond Lake Union and the Q2 2017 Seattle Children's Research Institute 818 Stewart Denny Regrade 74,122 Q2 2017 Airbnb 8th & Olive CBD 42,717 Q2 2017 Oculus VR Home Plate Center (S) SODO 35,877 Q2 2017 Society Consulting Madison Centre CBD 30,174 Q1 2017 Amazon Tilt49 Denny Regrade 307,296 Q1 2017 Amazon Westlake Terry Lake Union 147,432 Q1 2017 Snapchat Market Place Tower Waterfront 47,338 Q1 2017 Capital One 501 Eastlake Lake Union 39,489 Q1 2017 Zillow (Expansion) Russell Investments Center CBD 38,723 Third Quarter 2017 LEASING ACTIVITY The Seattle leasing market concluded the Third Quarter of 2017 with a contin- Quarter Tenant Building Q3 2017 Amazon Q3 2017 ued landlord favorable trend; although there were two new developments that with a 722,000 SF pre-lease of the recently commenced Rainier Square devel- Denny Regrade into the CBD. Another company that is continuing its growth in the Seattle Market is WeWork, which leased 73,000 SF at Fourth & Madison, the final 54,336 SF of available space at Hill7, and two full floors, totaling 18,000 SF, at 1411 Fourth. Other notable leases include a 160,000 SF sublease by Oracle at Russell Investments Center – Dorsey & Whitney renewed their lease of 68,386 SF at Columbia Center – Indeed subleased 44,631 SF at Russell Investments Center – and Textio leased a full floor of 22,774 SF at the newly delivered Madison Centre. MOST VACANT BUILDINGS (BY PERCENT AVAILABLE) Most Vacant Buildings (Sorted By Percentage Available) Rank Building Submarket Available Square Feet Percent Available 1 Elliott West Building 3 (Sublease) Waterfront 110,000 100% LARGEST CONTIGUOUS BLOCKS Largest Contiguous Blocks 2 1260 Mercer Lake Union 106,000 100% Rank Building 3 Elliott West Building 1 (Sublease) Waterfront 104,086 100% 1 2 4 2200 First (Sublease) 5 Madison Centre SODO 102,462 100% CBD 525,095 70% Submarket Floors Available Square Feet Madison Centre CBD 12-22 246,000 1201 Third CBD 17-24 182,341 3 2nd & Seneca CBD 1-7 158,453 4 Elliott West Building 3 (Sublease) Waterfront 1-5 110,000 5 1260 Mercer Lake Union 1-4 106,000 6 Elliott West Building 1 (Sublease) Waterfront 1-6 104,086 1-4 102,462 6 Met Park East CBD 140,244 39% 7 2nd & Seneca CBD 196,693 38% 8 800 Fifth CBD 254,134 25% 7 2200 First (Sublease) SODO 9 1201 Third CBD 267,281 24% 8 Madison Centre CBD 6-10 102,000 10 Columbia Center CBD 136,973 8% 9 800 Fifth CBD 24-28 95,668 10 Madison Centre CBD 24-27 89,900 broderickgroup.com 3 SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 Seattle Office Market Class A Historical Overview Historical Summary 2006 - Q3 2017 Forecast 2017 - 2020 Year Avg. Gross Rental Rate (Direct) Year-End Inventory New Construction Vacant Square Feet Net Absorption Vacancy Rate Annual Growth YTD Rent Rate Growth 2006 $29.41 26,695,478 1,071,109 2,009,591 1,888,918 7.5% 7.1% 12.6% 2007 $37.31 26,917,043 221,565 2,121,980 124,752 7.9% 0.5% 26.9% 2008 $37.91 27,446,933 529,890 2,963,393 (119,506) 10.8% -0.4% 1.6% 2009 $31.41 29,861,335 2,414,402 5,936,082 (644,971) 19.9% -2.2% -17.1% 2010 $31.38 30,762,677 901,342 5,554,673 994,359 18.1% 3.2% -0.1% 2011 $31.20 31,608,885 846,208 4,590,319 1,178,488 14.5% 3.7% -0.6% 2012 $31.80 31,985,904 400,563 4,254,955 1,490,442 13.3% 4.7% 1.9% 2013 $33.62 32,027,022 180,710 3,702,487 800,712 11.6% 2.5% 5.7% 2014 $34.95 32,661,260 480,000 3,018,471 1,029,132 9.2% 3.2% 4.0% 2015 $39.87 34,707,290 1,778,064 2,646,575 969,059 7.6% 2.8% 8.1% 2016 $41.79 35,557,077 886,525 1,608,547 1,924,553 4.5% 5.4% 4.8% Q3 2017 $42.12 38,382,026 2,824,949 2,544,451 1,889,045 6.7% 4.9% 0.8% SEATTLE OFFICE MARKET FORECAST The Class A vacancy rate is expected to remain stagnant or continue to increase slightly in the Fourth Avg. Gross Year 2006 2007 2008 Year-End Inventory New Construction Vacant Square Feet Net Absorption Vacancy Rate Annual Growth YTD Rent Rate Growth $29.41 26,695,478 1,071,109 2,009,591 1,888,918 7.5% 7.1% 12.6% $37.31 26,917,043 221,565 2,121,980 0.5% 26.9% Rental Rate (Direct) Quarter of 2017 as the newly delivered buildings with vacancies are expected to continue leasing up space 124,752 7.9% while the scheduled Fourth Quarter 2017 deliveries $37.91 27,446,933 529,890 2,963,393 (119,506) 10.8% -0.4% 1.6% 2009 are$31.41 set to deliver with large blocks of(644,971) vacant 19.9% space –-2.2% 29,861,335 2,414,402 5,936,082 -17.1% 2010 30,762,677 5,554,673 994,359152,800 18.1% SF.3.2% $31.38notably most with 9th901,342 & Thomas bearing -0.1% 2011 2012 2013 2014 2015 2016 Q3 2017 $31.20 31,608,885 846,208 4,590,319 1,178,488 14.5% 3.7% -0.6% $31.80 31,985,904 400,563 4,254,955 1,490,442 13.3% 4.7% 1.9% $33.62 32,027,022 180,710 3,702,487 800,712 11.6% 2.5% 5.7% $34.95 32,661,260 480,000 3,018,471 1,029,132 9.2% 3.2% 4.0% 1,778,064 2,646,575 969,059 7.6% 2.8% 8.1% 886,525 1,608,547 1,924,553 4.5% 5.4% 4.8% 38,382,026 2,544,451 1,889,045 $42.12 building Office sales 2,824,949 – complimented by a flux6.7% of new4.9% 0.8% Concessions including lowered to zero rent abatement has persisted favorably for landlords through the Third Quarter of 34,707,290 2017. $39.87 $41.79 35,557,077 Projected - End of Year Class A deliveries – in the Third Quarter of 2017 will 2017 2018 2019 2020 $43.46 39,792,430 3,748,991 2,954,812 2,351,584 7.4% 5.9% $45.20 41,445,830 1,653,400 3,083,005 1,525,207 7.4% 3.7% 4.0% rates per square foot.1,450,000 $45.52 42,895,830 2,953,029 1,579,977 6.9% 3.7% 0.7% 3,724,772 1,443,556 8.3% 3.2% 3.0% continue to push owners towards an increase in rental $46.89 45,111,130 Summary 2017-2020 2,215,300 4.0% Total Average Total Average Average Average 6,852,391 2,996,949 5,456,767 7.2% 4.4% 2.9% Notes: 1 Year end inventory, (CBD, Denny, Lk Union, Pioneer Sq, Waterfront, Fremont/UW), Class A, 20,000 SF and greater buildings (CoStar). Excludes owner/user. Projected - End of Year 2017 $43.46 39,792,430 3,748,991 2,954,812 2,351,584 7.4% 5.9% 4.0% 2018 $45.20 41,445,830 1,653,400 3,083,005 1,525,207 7.4% 3.7% 4.0% 2019 $45.52 42,895,830 1,450,000 2,953,029 1,579,977 6.9% 3.7% 0.7% 2020 $46.89 45,111,130 2,215,300 3,724,772 1,443,556 8.3% 3.2% 3.0% Total Average Total Average Average Average 6,852,391 2,996,949 5,456,767 7.2% 4.4% 2.9% 2 Vacant square feet and total absorption statistics provided by CoStar. Includes direct and sublease space. 3 New supply 2016-2019 is product of known projects and estimated probability of completion/financing. 4 All data are from end of the quarter specified. 5 Annual growth is net absorption divided by inventory. 6 2012 deliveries included: Amazon Phase V, Emerald Landing, and Home Plate Center I 7 2013 deliveries included: Bullitt Center (50k) delivered in Q2, 202 Westlake (130k) delivered in Q3 8 2014 deliveries included: Stone34 (106k) delivered in Q2, and Vulcan - Amazon Phase VI (392k) delivered in Q4 9 2015 deliveries include: Dexter Station (346k) delivered in Q1, Hill7 (285k) delivered in Q2, 400 Fairview (320k), Amazon Phase VII (312k), Amazon Phase VIII (316k), Allen Institute for Brain Science (245k), and Westlake Steps (150k) 10 2016 projected deliveries include: Troy Block Phase 1 (395k), NorthEdge (214k), 200 Occidental (173k), 2701 Eastlake (44k), Urban Union (291k), 1007 Stewart (365k), Fairview Research Center II (140k), and 503 Westlake (39k) 11 2017 projected deliveries include: Madison Centre (750k), The Mark (528k),Troy Block Phase 2 (422k), 400 Dexter (254k), Roy Street (200k), 450 Alaskan (165k), Tilt49 (307k), 15th & Market (202k), and Hawk Tower (200k) Summary 2017-2020 12 2018 projected deliveries include: 333 8th Avenue North (194k), 300 8th Avenue North (194k), Legacy Commercial Development (60k), Sellen Site (153k), Amazon's 4th Block (836k), and Vulcan's Block 48 (400k) 13 2019 projected deliveries include: Rainier Square (780k), Second & University (690k) Notes: 1 Year end inventory, (CBD, Denny, Lk Union, Pioneer Sq, Waterfront, Fremont/UW), Class A, 20,000 SF and greater buildings (CoStar). Excludes owner/user. 2 Vacant square feet and total absorption statistics provided by CoStar. Includes direct and sublease space. 3 New supply 2016-2019 is product of known projects and estimated probability of completion/financing. 4 All data are from end of the quarter specified. 5 Annual growth is net absorption divided by inventory. 6 2012 deliveries included: Amazon Phase V, Emerald Landing, and Home Plate Center I 7 2013 deliveries included: Bullitt Center (50k) delivered in Q2, 202 Westlake (130k) delivered in Q3 broderickgroup.com 8 2014 deliveries included: Stone34 (106k) delivered in Q2, and Vulcan - Amazon Phase VI (392k) delivered in Q4 4 9 2015 deliveries include: Dexter Station (346k) delivered in Q1, Hill7 (285k) delivered in Q2, 400 Fairview (320k), Amazon Phase VII (312k), Amazon Phase VIII (316k), Allen Institute for Brain Science (245k), SEATTLE OFFICE MARKET OVERVIEW Seattle Office Class A Market Vacancy Percentage and Average Gross Rental Rates Third Quarter 2017 (* Projected) CLASS A VACANCY RATES $46.89 Class A Vacancy % Class A Rental Rates (Gross) $45.20 $45.52 $45.00 19.9% 20.0% $43.46 18.1% $42.12 $41.79 17.5% $39.87 $37.91 15.0% Vacancy ( %) The largest submarket, the CBD, greatly influenced this trend by increasing in vacancy by 1.66% to 9.63%. Three other submarkets increased over a whole percentage point, adding to the increase in vacancy, with Pioneer Square increasing by 3.81% to 5.52% vacancy – Fremont increased by 2.97% to 7.05% vacancy – the Waterfront increased by 1.59% to 5.48% vacancy – and Lake Union slightly increased by 0.12% to a low vacancy rate of 1.67%. On the other hand, Denny Regrade was the only submarket to decrease in vacancy, by decreasing -1.17% to 3.75% vacancy. Vacancy rates are expected to remain stagnant or slightly increase in the Fourth Quarter of 2017, as new developments that are not fully leased are expected to enter the market. 22.5% $40.00 14.5% $37.31 13.3% 12.5% $34.95 11.6% $33.62 10.8% 10.5% 10.0% $31.41 $31.38 $31.80 $35.00 9.2% $31.20 8.3% $29.41 7.9% 7.5% 7.5% R ent al R at e ( $) Class A vacancy rates have increased overall to a rate of 6.70%. Although it is a large increase from last quarter (up 1.10% from Q2 2017), the effect is due primarily in part by the new delivery of six Class A office buildings in the Seattle market, which bear approximately 600,000 SF of unleased office space entering the market (accounting for around 1.5% of the entire Class A Seattle inventory); meaning that without the delivery of the new office space, there would have been a decrease in vacancy compared to the past quarter. 7.6% $30.00 7.4% 7.4% 6.9% 6.7% $26.13 5.0% 4.5% $25.00 2.5% 0.0% $20.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017 *2017 *2018 *2019 *2020 Seattle Office Class A Absorption Notable new development vacancies are the contiguous blocks at Madison Centre (max contiguous size of 246,000 SF), floors 8-11 of the soon-to-deliver Hawk Tower that total 76,165 SF of contiguous space, and floors 2-4 of 450 Alaskan that total 67,526 SF of contiguous space (with pending leases). Absorption Trends 3,400,000 3,200,000 (* Projected) 3,000,000 1,200,000 400,000 200,000 273,337 600,000 124,752 800,000 376,601 625,441 1,000,000 1,443,556 1,525,207 800712 994,359 1,400,000 1,178,488 1,600,000 969,059 1,800,000 1,029,132 1,490,442 2,000,000 1,579,977 1,924,553 1,888,918 2,200,000 129,859 0 (119,506) (200,000) (400,000) (600,000) (644,971) Class A rental rates maintained its increasing trend despite the continued rise in vacancy rates, ending the Third Quarter of 2017 at an average gross rate of $42.12. Every submarket experienced a rise in rental rates with the CBD, Denny Regrade, and Fremont experiencing double-digit increases of $0.12, $0.11 and $0.10 respectively from the past quarter putting the CBD at an average gross rate of $42.95 – Denny Regrade at $35.74 – and Fremont at $36.02. Following that, modest increases occurred in the other submarkets: Lake Union increased by $0.08 to $39.19 – Pioneer Square increased by $0.06 to $36.47 – and Waterfront remained stagnant at $35.72. The delivery of six Class A buildings in Q3 is a strong influencing factor for the rate increases in this quarter, and rental rates are likely to continue to increase in the coming quarters. 2,400,000 S q uar e F e et (S F) CLASS A RENTAL RATES 1,889,045 2,600,000 2,351,584 2,800,000 (800,000) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 broderickgroup.com 2014 5 2015 2016 Q3 2017 *2017 *2018 *2019 *2020 SEATTLE OFFICE MARKET OVERVIEW Seattle Office Class A Market Average Gross Rental Rates by Submarket Third Quarter 2017 NET ABSORPTION $42.12 Net absorption approached a historic high in Q3 of 2017 with a quarterly net Class A absorption of 1,019,025 SF which was influenced by the high quantity of pre-leases of the newly delivered office spaces. Through three quarters, the overall Class A absorption for 2017 is at 1,889,045 SF, which is near the total absorption rate seen in 2016 as the Seattle Market continues its substantial growth. The Class A CBD lead all submarkets in net Q3 absorption with a total of 590,661 SF, followed by Denny Regrade with 354,680 SF and Lake Union with 316,114 SF. Pioneer Square experienced 79,527 SF of absorption – Fremont had a negative absorption of -11,031 SF – and the Waterfront lost -310,926 SF of absorption due to the three former F5 Elliott West buildings entering the market as available sublease space. Percentage $36.02 $36.47 $42.95 $35.72 $35.74 Lake Union Denny Regrade Waterfront Seattle CBD Pioneer Square Fremont/University $39.19 Overall Class A $25.00 $26.00 $27.00 $28.00 $29.00 $30.00 $31.00 $32.00 $33.00 $34.00 $35.00 $36.00 $37.00 $38.00 $39.00 $40.00 $41.00 $42.00 $43.00 $44.00 Seattle Office Class A Absorption Year-to-Date Absorption Trends by Submarket Q4 2016 Q1 2017 Q2 2017 Q3 2017 Average 4.5% 1.7% 1.6% 1.7% 4.6% 4.3% 4.9% 3.7% 4.6% 4.0% 3.9% 5.5% 7.2% 8.0% 8.0% 9.6% 2.0% 2.0% 1.7% 5.5% 2.9% 2.6% 4.1% 7.1% 5.7% 5.5% 5.6% 6.7% 2.3% 4.4% 4.5% 8.2% 2.8% 4.2% 5.9% Q4 2016 Pioneer Square 133,895 6% Fremont/Univ -4,257 0% Lake Union Overall Class A: Seattle CBD 999,623 43% Percentage Seattle CBD 1,889,045 SF Q4 2016 Q1 2017 Pioneer Square Q2 2017 Lake Union Q3 2017 Denny Regrade Average Fremont/University Denny Regrade 383,228 17% Waterfront Waterfront -200,978 9% 3.7% Lake Union Note: 4.0% 3.9% Pioneer Square 1.7% 1.6% 1.7% 2.9% 2.6% 4.1% Fremont/Univ Absorption includes absorption for First Hill / Capitol Hill submarket. 0.0% 2.0% Lake Union Waterfront 4.6% 4.3% 8.0% 8.0% 4.9% 4.6% 3.7% 4.0% 4.4% 3.9% 5.5% Seattle 4.6% CBD 9.6% 4.5% 7.1% 5.7% 5.5% 5.6% 6.7% Q4 2016 1.7% 1.6% 1.7% 8.0% 1.7%6.0% 1.6% 1.7% Denny Regrade broderickgroup.com 6 4.0% Waterfront 7.2% 4.4% Lake Union Overall Class A Denny Regrade 1.7% 1.6% 4.6% 1.7% 4.3% 2.3% 4.9% 5.5% 3.7% Seattle CBD Overall Class A Net Vacancy Percentage by Submarket Seattle CBD 4.6% 5.5% Denny Regrade 4.5% Lake Union Q4 2016 Q1 2017 Q2 2017 Q3 4.5% 2017 1.7% 2.0% Average 2.0% 2.3% Q3 2017 4.6% 4.3% 4.9% Percentage Waterfront Q2 2017 4.5% 1.7% 1.6% 1.7% Denny Regrade Lake Union 577,534 25% Q1 2017 Seattle Office Class A Market Pioneer 7.2% Square 4.0% 3.9% 7.2% 5.5% 8.0% 4.5% 8.0% 9.6% Q4 2016 8.2% Q1 2017 4.5% 10.0% 8.0% 8.0% 2.0% 9.6% 2.0% 8.2% 1.7% Q15.5% 2017 Q2 2 2.8% Q2 2017 4.5% Q3 2017 12.0% 4.6% 4.3% 4.9% SEATTLE OFFICE MARKET OVERVIEW Seattle Office Class A Statistics Third Quarter 2017 Submarket Statistics Seattle A Submarket SeattleClass Class A Submarket Statistics Statistics Submarket Total RSF Inventory Vacancy Rate Vacancy Rate Quarterly Change Vacancy Rate YTD Change 2.46%Rate Vacancy YTD Change -0.83% 2.46% -2.79% -0.83% 4.13% -2.79% 3.55% 4.13% 0.84% 3.55% 9.63% Vacancy Rate Denny Regrade CBD Lake Union Denny Regrade Fremont Lake Union Pioneer Square Fremont Waterfront Pioneer Square 3.75% 9.63% 1.67% 3.75% 7.05% 1.67% 5.52% 7.05% 5.48% 5.52% 1.66%Rate Vacancy Quarterly Change -1.17% 1.66% 0.12% -1.17% 2.97% 0.12% 3.81% 2.97% 1.59% 3.81% Waterfront 2,003,071 5.48% 1.59% Submarket Total RSF Inventory Vacancy Rate 9.70% Vacancy Rate Denny Regrade CBD Lake Union Denny Regrade Fremont Lake Union Pioneer Square Fremont Waterfront Pioneer Square 25,022,510 Total RSF Inventory 6,794,950 25,022,510 9,378,484 6,794,950 2,092,661 9,378,484 5,157,427 2,092,661 5,137,750 5,157,427 Waterfront 5,137,750 CBD Submarket Rental Rates Quarterly Change Rental Rates YTD Change $0.12 Rental Rates Quarterly Change $0.11 $0.12 $0.08 $0.11 $0.10 $0.08 $0.06 $0.10 $0.00 $0.06 $0.47 Rental Rates YTD Change $1.64 $0.47 $0.53 $1.64 $2.26 $0.53 $0.25 $2.26 $0.14 $0.25 Seattle Class A Submarket Statistics 18,844,936 Total RSF Inventory 4,553,966 18,844,936 7,103,336 4,553,966 1,406,753 7,103,336 1,702,367 1,406,753 2,003,071 1,702,367 CBD Submarket Rental Rates $42.95 Rental Rates $35.74 $42.95 $39.19 $35.74 $36.02 $39.19 $36.47 $36.02 $35.72 $36.47 Seattle 0.84% Entire Submarket Statistics $35.72 Vacancy Rate Vacancy Rate Entire YTD Change QuarterlySeattle Change $0.00 $0.14 Rental Rates Rental Rates $0.59 Rental Rates YTD Change $1.13 $0.59 $0.29 $1.13 $1.83 $0.29 $1.42 $1.83 $0.01 $1.42 $0.01 Rental Rates Submarket Statistics Quarterly Change YTD Change Seattle Entire Submarket Statistics 1.29%Rate Vacancy YTD Change -1.03% 1.29% -1.39% -1.03% 1.37% -1.39% 0.53% 1.37% 0.29% 0.53% $40.81 Rental Rates 5.02% 9.70% 2.63% 5.02% 6.31% 2.63% 4.76% 6.31% 5.12% 4.76% 0.55%Rate Vacancy Quarterly Change -1.17% 0.55% 0.66% -1.17% 1.21% 0.66% 0.77% 1.21% 0.33% 0.77% $33.90 $40.81 $34.03 $33.90 $33.94 $34.03 $33.89 $33.94 $33.87 $33.89 $0.03 Rental Rates Quarterly Change $0.09 $0.03 $0.05 $0.09 $0.04 $0.05 $0.08 $0.04 $0.00 $0.08 5.12% 0.33% 0.29% $33.87 $0.00 broderickgroup.com Absorption (QTR) Asorption (YTD) 590,661 999,623 Absorption (QTR) Asorption (YTD) 354,680 590,661 316,114 354,680 -11,031 316,114 79,527 -11,031 -310,926 79,527 383,228 999,623 577,534 383,228 -4,257 577,534 133,895 -4,257 -200,978 133,895 -310,926 -200,978 Absorption (QTR) Asorption (YTD) 607,058 1,056,149 Absorption (QTR) Asorption (YTD) 380,684 607,058 367,304 380,684 14,969 367,304 87,399 14,969 -310,926 87,399 439,766 1,056,149 789,819 439,766 11,863 789,819 158,425 11,863 -175,232 158,425 -310,926 -175,232 7 SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 Q3 2017 INVESTMENT SALES UPDATE Investment Sales Update Quarter Building Submarket Bldg Size (SF) Buyer Price ($) / SF On Market 1111 Third CBD 575,000 --- On Market 8th & Olive CBD 300,709 --- On Market Millennium Tower CBD 199,078 --- On Market Joseph Vance Building CBD 124,136 --- Q3 2017 Exchange Building CBD 300,508 Blackstone $520.78/SF Q3 2017 NorthEdge Lake Union 210,000 Clarion Partners $751.67/SF Q3 2017 World Trade Center North Waterfront 133,777 Unico $485.88/SF Q3 2017 Macy's Building (Partial) CBD 100,000 Starwood Capital Group $500.00/SF Q2 2017 Midtown21 Denny Regrade 373,458 Union Investment Real Estate $884.17/SF Q2 2017 Dexter Station Lake Union 345,992 Tristar Capital $826.61/SF Q2 2017 428 Westlake Lake Union 88,225 Karigo LLC $923.77/SF Q1 2017 Urban Union Lake Union 291,000 Tristar Capital $924.19/SF Q1 2017 Legacy Center Denny Regrade 72,375 PCCP, LLC $303.28/SF Q4 2016 Amazon Phase VII Lake Union 317,189 Tristar Capital $769.26/SF Q4 2016 KOMO Plaza Lake Union 294,000 GI Partners $938.21/SF Q4 2016 Hill7 Denny Regrade 285,680 Hudson Pacific Properties $629.45/SF Q4 2016 Fifth & Bell Denny Regrade 197,136 Blackstone $386.76/SF Q4 2016 Broadacres Building CBD 123,109 LBA Realty $203.07/SF 1111 THIRD - ON MARKET On Market Q3 2017 8TH & OLIVE - ON MARKET Q2 2017 Q1 2017 MILLENNIUM TOWER - ON MARKET Q4 2016 JOSEPH VANCE - ON MARKET EXCHANGE BLDG - ON MARKET NORTHEDGE - ON MARKET MACY’S (PARTIAL) - SOLD WORLD TRADE CENTER NORTH - SOLD broderickgroup.com 8 SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 NEW CONSTRUCTION Seattle New Developments Current Under Construction Developments in Seattle New Office Development Projects (Under Construction) The Third Quarter of 2017 supplied the Seattle Square Footage Developer Scheduled Completion Date % Leased Pioneer Square 208,840 AmericanLife Q4 2017 64% 15th & Market Ballard 202,000 Martin Selig Q4 2017 100% with approximately 70% vacancy – Daniels 9th & Thomas Lake Union 152,800 Sellen Construction Q4 2017 0% Development and Stockbridge Capital’s F5 Maritime Building Waterfront 188,400 Beacon Capital Q1 2018 100% Tower (formerly The Mark) (528,000 SF), which Fremont Office Building Lake Union 125,000 First Western Development Services Q1 2018 100% is fully leased by F5 – Touchstone’s Troy Block Arbor Blocks Lake Union 384,000 Vulcan Q3 2018 100% (423,000 SF) and Tilt49 (307,296 SF) both 1525 11th Avenue Capitol Hill 75,400 Legacy Commercial Q3 2018 0% delivering fully leased by Amazon – Alexandria 1818 Fairview Lake Union 212,000 Alexandria Real Estate Equities Q4 2018 0% Real Estate’s 400 Dexter (288,850), which is Rainier Square CBD 722,000 Wright Runstad Q3 2019 100% Juno Therapeutics’ new headquarters – and 2&U CBD 670,000 Skanska Q3 2019 0% Hudson Pacific’s 450 Alaskan with approximately 333 Dexter Lake Union 528,000 Kilroy Q3 2019 0% 40% vacancy. The Fourth Quarter of 2017 is Third & Lenora Belltown 176,500 Martin Selig Q2 2020 100% expected to supply an additional 500,000+ SF of TOTALS Project Name Submarket office space. Deliveries include the following: Hawk Tower Schnitzer West’s Madison Centre (746,000 SF) Market with nearly 2.5 million SF of new 3,644,940 48% new office space to the Seattle Market. 2&U Hawk Tower 1818 Fairview 9th & Thomas Maritime Building Rainier Square broderickgroup.com 333 Dexter 9 Third & Lenora Detailed Charts & Graphs SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 APPENDIX Seattle Office Class A Market Vacancy Percentage and Average Gross Rental Rates (* Projected) 22.5% $46.89 Class A Vacancy % Class A Rental Rates (Gross) $45.20 $45.52 $45.00 19.9% 20.0% $43.46 18.1% $41.79 $42.12 17.5% $39.87 $37.91 15.0% $40.00 14.5% $37.31 13.3% 10.8% 10.5% 10.0% $34.95 11.6% $33.62 $31.41 $31.38 $31.80 9.2% $31.20 8.3% $29.41 7.9% 7.5% 7.5% $35.00 7.6% 7.4% $30.00 7.4% 6.9% 6.7% $26.13 5.0% 4.5% $25.00 2.5% 0.0% $20.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017 *2017 *2018 Year broderickgroup.com 10 *2019 *2020 R ental R ate ($) Vacanc y (% ) 12.5% Detailed Charts & Graphs SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 APPENDIX Seattle Office Class A Absorption Absorption Trends (* Projected) 3,400,000 3,200,000 3,000,000 800712 1,200,000 400,000 200,000 273,337 600,000 124,752 800,000 376,601 625,441 1,000,000 1,443,556 1,178,488 994,359 1,400,000 129,859 0 (119,506) (200,000) (400,000) (600,000) (644,971) S quare Feet (S F) 1,600,000 969,059 1,800,000 1,029,132 2,000,000 1,490,442 2,200,000 1,525,207 1,888,918 1,924,553 2,400,000 1,889,045 2,600,000 1,579,977 2,351,584 2,800,000 (800,000) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017 broderickgroup.com *2017 11 *2018 *2019 *2020 Lake Union Denny Regrade Waterfront Seattle CBD Pioneer Square 4.6% 4.3% 4.9% 3.7% 4.6% 4.0% 3.9% 5.5% 7.2% 8.0% 8.0% 9.6% 2.0% 2.0% 1.7% 5.5% 4.4% 4.5% 8.2% 2.8% Overall Class A Detailed Charts & Graphs Fremont/University Percentage SEATTLE OFFICE 4.5% Q4 2016 Q1 2017 1.7% MARKET OVERVIEW Q2 2017 1.6% Third Quarter 2017 APPENDIX Q3 2017 1.7% Average 2.3% Q4 2016 Lake Union Q1 2017 Q2 2017 3.7% Q3 2017 4.6% 5.5% 7.2% Seattle CBD 2.0% 2.0% 1.7% 4.1% 9.6% 7.1% 5.7% 5.5% 5.6% Overall Class A 2.0% 8.0% 8.0% 5.5% 2.9% 2.6% Fremont/University 5.9% Vacancy Percentage by Submarket 4.6% 4.3% 4.9% 4.0% 3.9% Waterfront 0.0% 4.2% 5.7% 5.5% 5.6% Class 6.7% A Market 4.5% 1.7% 1.6% 1.7% Denny Regrade Pioneer Square 2.9% 2.6% 4.1% Seattle 7.1% Office 4.0% 6.0% 6.7% 8.0% broderickgroup.com 10.0% 12 12.0% Detailed Charts & Graphs SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 APPENDIX Seattle Office Class A Market Average Gross Rental Rates by Submarket $42.12 $36.02 $36.47 $42.95 $35.72 $35.74 $39.19 $25.00 $26.00 $27.00 $28.00 $29.00 $30.00 $31.00 $32.00 $33.00 $34.00 $35.00 $36.00 $37.00 $38.00 $39.00 $40.00 $41.00 $42.00 $43.00 $44.00 broderickgroup.com 13 Detailed Charts & Graphs SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 APPENDIX Seattle Office Class A Absorption Year-to-Date Absorption Trends by Submarket Pioneer Square 133,895 6% Fremont/Univ -4,257 0% Lake Union 577,534 25% Overall Class A: 1,889,045 SF Seattle CBD 999,623 43% Denny Regrade 383,228 17% Lake Union Denny Regrade Waterfront Waterfront -200,978 9% Seattle CBD Pioneer Square Fremont/Univ broderickgroup.com 14 SEATTLE OFFICE MARKET OVERVIEW Third Quarter 2017 Please visit broderickgroup.com for all available properties Seattle Office 600 University Street, Suite 2220 Seattle, Washington 98101 Main. 206.838.5775 Fax. 206.838.7640 Bellevue Office 10500 NE 8 th Street, Suite 900 Bellevue, Washington 98004 Main. 425.646.3444 Fax. 425.646.3443 Commercial Real Estate Services 600 University Street, Suite 2220 Seattle broderickgroup.com