1Q 2018 DFW Office Market Brief by Holt Lunsford Commercial

Market Brief... Dallas/Fort Worth

OFFICE

1Q18 Property Pictured Above: The Berkshire, 5950 Berkshire Lane, Dallas, Texas

DFW OFFICE MARKET BRIEF 1Q 2018

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

1 2 3

2. OVERALL DALLAS/FORT WORTH OFFICE MARKET A. Facts and Figures

2. SUBMARKET INTELLIGENCE A. Dallas Central Business District

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

DFW

HLC SUBMARKET COVERAGE

HLC DFW OFFICE MARKET EXPERTS

MATT CARTHEY

DAVID CASON

GEOFF SHELTON

HOLDEN LUNSFORD

Partner - Fort Worth mcarthey@hlfortworth.com 817.710.1111

Vice President-Fort Worth dcason@hlfortworth.com 817.810.9137

Managing Principal - Fort Worth gshelton@hlfortworth.com 817.710.1113

JOHN DICKENSON

JAMES ENGELS

MARSHALL MAYS

BRANDON AVEDIKIAN

Managing Principal - Dallas jdickenson@hldallas.com 972.421.1971

Market Director - Dallas jengels@hldallas.com 972.280.8307

Market Associate - Fort Worth mmays@hlfortworth.com 817.632.6150

Market Associate - Dallas bavedikian@hldallas.com 972.280.8302

DAN POND

DYLAN SHAPIRO

LORI VUKOVICH

GISELA STERNBALSLEY

Market Analyst - Dallas dpond@hldallas.com 972.381.3218

Market Analyst - Dallas dshapiro@hldallas.com 972.381.3219

Marketing Coordinator - Dallas lvukovich@hldallas.com 972.381.3206

Marketing Coordinator - Fort Worth gbalsley@hldallas.com 817.710.1110

Managing Principal - Dallas holdenlunsford@hldallas.com 972.381.3218

NEW LISTING

2800 N DALLAS PARKWAY

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

3500 OAK LAWN

NEW LISTING

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

NEW LISTING

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

4131 NCX

4245 NCX

NEW LISTING

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

HLC DFW OFFICE MARKET EXPERTS

VACANCY - OVERALL DFW

CONSTRUCTION - OVERALL DFW 9,000,000

25.00%

8,000,000

19.30% 20.00%

18.30%

7,000,000 6,000,000

18.0%

17.3%

15.00%

5,000,000 4,000,000

10.00% 3,000,000 2,000,000

5.00%

1,000,000

1.30%

1.10%

0.00% Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Direct Vacancy

Q3 16

Q4 16

Q1 17

Q2 17

Sublet Vacancy

Q3 17

Q4 17

Q1 15

Q1 18

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Delivered Inventory

Total Vacancy

ABSORPTION - OVERALL DFW

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Under Construction

OVERVIEW - OVERALL DFW 2,500,000

16.0%

2,000,000

15.0%

1,500,000

14.0%

1,000,000

13.0%

500,000

12.0%

800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0

(100,000)

11.0%

(200,000)

(500,000) Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Q4 17

10.0%

Q1 18

(300,000) Q1 15

Total Net Absorption

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Deliveries

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

Market

Existing Inventory # Bldgs.

Vacancy

Total RBA

Direct SF

Total SF

Vac. %

YTD Net Absorption

YTD Deliveries

Under Const. SF

Quoted Rates

Central Expressway

107

12,669,491

1,629,867

1,885,873

14.9%

(320,376)

$28.14

Dallas CBD

28,995,965

6,979,361

7,644,140

26.4%

228,152

261,400

163,025

$25.34

East Dallas

190

7,838,707

837,155

856,165

10.9%

1,229

341,320

$25.35

Far North Dallas

464

48,748,739

8,629,631

9,530,103

19.5%

(69,466)

641,191

940,637

$27.92

Fort Worth CBD

8,496,358

1,139,170

1,151,750

13.6%

(25,462)

280,489

$26.56

Las Colinas

283

34,279,164

4,905,095

5,563,534

16.2%

489,094

250,000

1,965,500

$25.01

LBJ Freeway

170

21,127,513

4,460,615

4,649,246

22.0%

99,834

$22.47

Lewisville/Denton

160

7,650,766

1,220,822

1,260,168

16.5%

(44,714)

84,976

$22.42

Mid-Cities

425

21,868,093

4,461,477

4,561,695

20.9%

19,783

416,900

$22.12

North Fort Worth

2,804,917

537,807

19.2%

(48,567)

364,000

$21.05

Northeast Fort Worth

3,570,284

1,678,938

1,718,575

48.1%

83,567

$21.25

Preston Center

4,723,709

564,563

605,296

12.8%

40,059

119,000

$40.24

Richardson/Plano

367

28,686,728

5,829,799

6,054,318

21.1%

104,434

79,014

614,500

$24.66

South Fortt Worth

217

11,233,730

1,061,745

1,165,429

10.4%

(46,976)

232,417

$23.81

Southwest Dallas

3,608,697

318,099

8.8%

62,639

$18.31

Stemmons Freeway

113

12,309,879

3,268,346

3,293,991

26.8%

(129,436)

$16.96

Uptown/Turtle Creek

12,411,993

1,303,721

1,552,006

12.5%

105,205

130,000

1,175,014

$38.35

2,969

271,024,733

48,826,211

52,348,195

19.3%

548,999

1,361,605

6,697,778

Totals

$25.34 Source: CoStar PropertyÂ®

DALLAS CENTRALINTELLIGENCE BUSINESS DISTRICT SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

228,152

(118,620)

(113,678)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

26.4%

26.5%

26.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

163,025 Delivered SF 261,400 Quoted Rates $25.34

424,425

414,347

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$25.37

$25.69

VITAL STATS 28.0%

600,000

400,000 26.0% 200,000

0 24.0% (200,000)

22.0%

(400,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS • Popular Boston-based healthcare operator, Steward Healthcare System, announced this week they will be relocating their headquarters to 1900 Pearl this summer. The firm will staff approximately 100 employees in the new 25-story office tower which stands in the Dallas Arts District. Steward Healthcare System joins Baker McKenzie as key tenants. • Dallas-based law firm Bell Nunnally & Martin LLP will be relocating their office to KPMG Plaza at Hall Arts from One McKinney Plaza. The signed lease is for the top two floors and will bring the building occupancy to 93%. Bell Nunnally & Martin will join tenants KPMG, Jackson Walker LLP and UMB Bank. • Dallas Morning News reported earlier this week that Amazon officials visited Dallas in February as it continues its search for an HQ2. Multiple sources are reporting that Downtown Dallas seems to be the favorite to land the retail giant if Dallas is selected. Amazon expects to make their decision by year-end.

DEALS IN THE MARKET • Houseman Building ¬ a 47K SF Class B office building NEW DEVELOPMENTS • 401 N Houston Street/The Luminary 102,315 SF • 140 Elm Street/The Drever – 60,710 SF LARGE EXISTING VACANCIES • Thanksgiving Tower/1601 Elm Street – 376,547 SF • Bank of America Plaza/901 Main Street – 323,649 SF • Fountain Place/1445 Ross Avenue – 295,898 SF • 1700 Pacific/1700 Pacific Avenue – 236,493 SF • 1700 Pacific/1700 Pacific Avenue – 206,909 SF

TOP LEASE TRANSACTIONS • Thompson & Knight signed a 154K SF renewal in One Arts Plaza.

• Steward Health Care signed a 66K SF lease in 1900 Pearl.

• Bell Nunnally & Martin signed a 42K SF lease in Hall Arts Center.

• TriGate Capital signed a 12.1K SF lease in Comerica Bank Tower.

• Knoll, Inc. signed a 9.8K SF lease in One Arts Plaza. • Raymond Harris & Associates Architects signed an 8K SF lease in 211 North Record Street.

CENTRAL INTELLIGENCE EXPRESSWAY SUBMARKET VITAL STATS

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(320,376)

(87,857)

(45,943)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

16.0%

14.9%

12.4%

12.0%

14.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$27.29

$26.99

Delivered SF Quoted Rates $28.14

20.0%

400,000

18.0%

300,000 200,000 100,000

12.0% 10.0%

8.0%

(100,000)

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

2.0% 0.0%

(400,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS Dallas ranks second in a nationwide list of cities that property investors have the most interest in buying product, according to a new CBRE report. The poll found that 88% of investors are interested in expanding and holding their commercial product in the metroplex. Dallas trails only to Los Angeles.

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

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

TOP LEASE TRANSACTIONS • APC Workforce Solutions, LLC signed a 16.5K SF lease in 10100 N Central Expressway. • Eggar Insurance Services signed a 10.1K SF lease in 1101 N Central Expressway. • Hayden Consultants signed a 9.1K SF renewal in Meadows Building. • Delta signed a 6.2K SF lease in Premier Place. • Primalend Capital signed a 7.4K SF lease in Meadow Central.

DEALS IN THE MARKET • 10100 N Central Expressway – a 94,294 SF Class B office building

• Search Plaza – a 154,767 SF Class B office building NEW DEVELOPMENTS No developments are currently under construction at this time. However, three have been proposed: • Four Energy Square – 400,000 SF Built to Suit • 8010 Park Lane – 352,000 SF Office (Community Center) Building • Office Tower in The Glen at Preston Hollow – 250,000 SF Class A Office Building

FAR NORTH DALLAS SUBMARKET INTELLIGENCE Absorption (69,466)

vs. Prev. Qtr

vs. 12 Mths Ago

(398,573)

(349,057)

VITAL STATS 20.0% 900,000

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

19.0%

19.5%

18.3%

17.5%

18.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

17.0%

1,555,428

1,540,328

vs. Prev. Qtr

vs. 12 Mths Ago

940,637 Delivered SF 641,191 Quoted Rates $27.92

641,990

414,324

vs. Prev. Qtr

vs. 12 Mths Ago

$27.90

$27.54

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

16.0% (100,000)

15.0% 14.0%

(300,000) (500,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS • Co-working giant, WeWork, is doubling their presence in the Shops of Legacy in Plano. The firm announced this week they will be signing a lease for 60,000 square feet of space just across the street from their Legacy West location. WeWork has now inked over 100,000 square feet of space in Legacy in just under a year. Their new space can add approximately 1,100 new memberships. • Dallas developer Randy Heady announced that the twin-office towers, Headquarters II, is breaking ground in Plano in only a few months. The complex will bring 425,000 square feet of Class A office space to the booming Legacy Business Park. The 14-story office towers will lay on 5 acres off Headquarters Drive and will neighbor a new hotel that will be a part of the new development. • Billingsley Company has filed plans that will bring four more office buildings to International Business Park in Plano. The park currently has about 1.5 million square feet of office space that is 90% leased.

DEALS IN THE MARKET • The Colonnade – a 1,051,541 SF Class A office complex • Bent Tree Tower II – a 166,023 SF Class B office building

• Lincoln Legacy Two – a 130,371 SF Class A office building

• Parkwood Place I – a 98,750 SF Class A office building NEW DEVELOPMENTS • Wade Park – 266,136 SF spec under construction • Fourteen555 North Building – a 240,000 SF office building by Cawley Partners

• Stonebrook Building I – 90,000 SF office building with Goveia Commercial Real Estate

LARGE EXISTING VACANCIES • International Plaza II/14221 N Dallas Parkway – 405,990 SF

• The Campus at Legacy/5320 Legacy Drive – 373,739 SF

TOP LEASE TRANSACTIONS • Executive Workspace signed a 17K SF lease in Frisco Station.

• T-Force signed a 16.8K SF lease in The Belvedere. • Robert Half International signed a 13.2K SF lease in

HLC Deal

• The Campus at Legacy West/6501 Legacy Drive – 370,625 SF

• International Plaza I/14201 N Dallas Parkway – 351,000 SF

• Hall Park – T2/3201 N Dallas Parkway – 300,000 SF

The Addison.

• CPSG Partners, LLC signed an 11K SF lease in Providence Towers.

• ESRP signed a 10.8K SF lease at The Star.

FORT WORTH CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(25,462)

(2,242)

26,220

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

13.6%

13.3%

14.4%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

280,489

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$26.75

$25.28

280,489 Delivered SF Quoted Rates $26.56

VITAL STATS 16.0%

120,000 100,000 80,000 60,000

14.0%

40,000 20,000 0 12.0%

(20,000) (40,000) (60,000)

10.0%

(80,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy Source: CoStar 2018 1Q Office Report

CURRENT EVENTS PANTHER ISLAND - Supporters say the proposed Panther Island project will reinvent Fort Worth’s city center, making it a residential and commercial jewel with a picturesque river walk. Opponents say it’s a billion-dollar boondoggle, a project that has already eaten up more than $100 million since 2004, with little to show for it — other than the ongoing construction of three bridges over dry land. On May 5, voters will decide — perhaps once and for all — whether it’s worth the time and money to finish the proposed 800-acre island north of downtown Fort Worth. TORNADO ANNIVERSARY - It’s been 18 years since a tornado ripped through the heart of Fort Worth and a second twister dropped down on parts of Arlington and Grand Prairie. On March 28, 2000, the tornado tore a path through the center of downtown destroying major high-rise buildings. Fort Worth’s skyline shows no clue of the devastation. The Bank One building is now home to highend condos. The battered Montgomery Ward warehouse is now booming with residential and retail development. And other buildings ripped apart by the tornado, such as the Cash America building, got not only a face-lift but a total redo. WORTH TOWER - Fort Worth City Council members have approved zoning for The Worth, a 30-story luxury condo tower designed to serve as a gateway to the broader Panther Island development. The Worth, which faces West Bluff and is bounded by North Henderson Street, Mills Street and West Peach Street, will provide an iconic entrance to downtown via a new bridge to be built on Henderson, the project’s developers say. The project is the only high-rise residential development of its kind planned for Fort Worth and will feature a total of 136 high-end homes.

TOP LEASE TRANSACTIONS • Bank of Texas – 21,000 SF New Deal at 777 Main DEALS IN THE MARKET • Petroleum Building & Parking Garage – 94,000 SF Class B Office Tower (CLOSED) • Waggoner Building – 120,000 SF Class B Office Tower • Oil & Gas/Star-Telegram – 420,000 SF Class B Office Complex

NEW DEVELOPMENTS • Frost Tower – 280,500 SF Class A Tower (DELIVERED) LARGE EXISTING VACANCIES • Burnett Plaza – 263,500 SF Class A Direct Vacancy • Bank of America Tower – 190,000 SF Class A Direct Vacancy

• 777 Main – 150,000 SF Class A Direct Vacancy • Frost Tower – 136,000 SF Class A Direct Vacancy • Oil & Gas/Star-Telegram – 113,000 SF Class B Direct Vacancy

LAS COLINAS SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

489,094

(36,059)

385,556

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

16.2%

17.1%

15.8%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,935,500

932,481

vs. Prev. Qtr

vs. 12 Mths Ago

20,000

544,183

vs. Prev. Qtr

vs. 12 Mths Ago

$24.84

$24.00

1,965,500 Delivered SF 250,000 Quoted Rates $25.01

VITAL STATS 18.0%

600,000

17.5%

500,000

17.0%

400,000

16.5%

300,000

16.0%

200,000

15.5%

100,000

15.0%

14.5%

(100,000) (200,000)

14.0% Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Deliveries

Q4 17

Q1 18

Vacancy Source: CoStar 2018 1Q Office Report

CURRENT EVENTS Dallas Cowboy’s owner Jerry Jones’ real estate company is gearing up for a major mixed-use project in Irving at the Southeast corner of W John Carpenter Freeway and President George Bush Turnpike. Plans for the 28acre project include a hotel, retail space, apartments and a community park at the center. The project will be constructed by the Jones family’s Blue Star Land LP and Dallas-based Lincoln Property Company. 288 apartment units will be constructed on Meridian Drive, while the hotel site is currently slated on the north side of the parcel along High Point Drive. The development plans are still awaiting final approvals by Irving’s City Council with timing of the project yet to be released. Big Beat Dallas, the newest creation by Billy Bob Barnett, will join up with Toyota Music Factory this spring. The 90,000 square foot project will offer community events or “engagement” 24-hours a day. The project includes six dining and drinking establishments, a daily Rancher’s Market and two outdoor stages on the Texas Lottery Plaza. The six dining and drinking establishments will include Texas Jam House, Bar Manzanilla, Highway 61 South, Texas C-Bar, Martini Ranch and Marketplace Bars in the Texas Lottery Plaza. Big Beat Dallas will have happy hour every day, and its unique liquor license allows guests to carry their libations from one locale to another within the complex.

TOP LEASE TRANSACTIONS • Medallion Midstream signed a 28,058 SF lease at Tower 909. • Allstate Insurance signed a 126,596 SF lease at 1111 Northpoint Drive. • United Capital signed a 39,000 SF lease extension at 125 E John Carpenter.

DEALS IN THE MARKET • 1300 E Rochelle Boulevard – 205,893 SF Class B Office Building • 4929 Royal Lane W – 29,816 SF Class B Office Building

NEW DEVELOPMENTS • Two 250,000 SF Class A office buildings are under construction in Cypress Waters Office Park. Both buildings are being built on a spec basis with one set to deliver July 2018 and the other March 2019. • The Music Factory 100,000 SF Class A office building is nearing completion in the Urban Center. The building is set to deliver April 2018 and is fully leased to The Ethos Group. • Royal 10 Office Center is a 114,500 SF Class B office building under construction in Freeport. The building is set to deliver June 2018. • A 1,125,000 SF Class A office campus is under construction in Hidden Ridge. The project is slated for delivery in July 2019 and will house Pioneer Resources.

LARGE EXISTING VACANCIES • 1925 W John Carpenter – 405,432 SF • 901 W Walnut Hill Lane – 346,951 SF • 1915 Hurd – 322,590 SF • 1555 W Walnut Lane – 160,052 SF • Browning Place I – 124,648 SF • 6031 Connection Drive – 119,202 SF • MacArthur Center I – 84,619 SF • Riverside Commons – 75,048 SF • Royal Tech 14 – 102,200 SF • Beltline Office Center – 135,200 SF

LBJ SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

99,834

(45,616)

2,849

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

22.0%

22.5%

23.2%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$22.38

$22.03

Delivered SF Quoted Rates $22.47

VITAL STATS 27.0%

300,000 250,000

26.0%

200,000 25.0%

150,000

24.0%

100,000 50,000

23.0%

0 22.0%

(50,000)

21.0%

(100,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS • Dallas-based Champion Partners is investing over $2 million in upgrades for the 4851 LBJ office tower. These improvements include a fitness center, tenant lounge, café and a new conference center. The investor has owned the building at Dallas North Tollway and LBJ since 2015. • Crescent Real Estate and Goldman Sachs Asset Management have partnered to purchase the 192,000 square foot GuideStone Building on Cedar Springs. This comes less than a week after Guidestone announced they will be moving their headquarters to Pinnacle Tower along LBJ Freeway. John Goff, Crescent’s CEO, has plans for exterior improvements, a renovated building lobby and new retail for the property.

TRENDS & TRANSACTIONS • Guidestone Financial Resources signed a 112.8K SF lease in Pinnacle Tower.

• Outmatch signed a 15K SF lease in One Galleria. • Gallagher Benefit Service of Texas signed a 14.4K SF lease in Two Lincoln Centre. • MyComputerCareer signed a 9.1K SF lease in High Point Center. • Reed Wells & Benson signed an 8K SF renewal in CBS Tower. • Select Sports Group Inc. signed a 6.6K SF lease in Pinnacle Tower.

DEALS IN THE MARKET CBS Tower – a 246,955 SF Class A office building Toll Hill Office Park – a 258,502 SF Class B office building Midtown Office Center – a 97,452 SF Class B office building Banner Place South – a 26,298 SF Class B office building

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

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

• 13342 Midway Road – 105,000 SF

MIDINTELLIGENCE CITIES SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

19,783

69,085

(120,748)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

20.9%

21.9%

19.6%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

333,900

618,358

vs. Prev. Qtr

vs. 12 Mths Ago

124,018

158,225

vs. Prev. Qtr

vs. 12 Mths Ago

$22.03

$21.83

416,900 Delivered SF Quoted Rates $22.12

VITAL STATS 27.0%

300,000 250,000

26.0%

200,000 25.0%

150,000

24.0%

100,000 50,000

23.0%

0 22.0%

(50,000)

21.0%

(100,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS The City of Arlington has announced plans for a 100,000 square foot, stat-of-the-art esports stadium that is scheduled to open in late 2018. Once completed, the space will be the largest of its kind in the United States. The city, architecture firm Populous, Esports Venues, and NGAGE Esports are partnering to deliver the facility. The project will include space for competitive events, team training rooms, broadcast studios, retail space, social outlets and VIP hospitality areas. The venture will be located in existing space in the Arlington Convention Center. $10 million will be invested in the renovations to the stadium with the design and architectural work being conducted by Populous, the firm that designed the T-Mobile Stadium in Las Vegas and the Amway Center in Orlando. The venue plans to attract international events to the City of Arlington. Glade Parks Town Center in Euless is slated for completion by late summer 2019. Located on the west side of Highway 121 south of W Glade Road and north of Cheek Sparger Road, the project will deliver a landscaped plaza where the shopping center plans to host family entertainment events. The shopping center plans to eventually deliver over 800,000 square feet of retail, restaurant and entertainment space. With Euless voters approving a change to allow liquor stores in the city in 2017, Total Wine & More plans to open a new location in Glade Parks this fall. Other new Tenants for the project include Oregon-based Thirsty Lion Gastropub & Grill, Forever 21 Red, Hododdy, Francesca’s, DXL, Imperial Hibachi, Neopolitan Pizza Company, Old Navy and an Aloft Hotel.

TOP LEASE TRANSACTIONS • WW Steel signed a 5,538 SF lease at 1981 Stadium Oaks Court

• Thrive Internet Marketing signed a 5,644 SF lease at

HLC Deal

700 Highlander.

• Lovein Ribman PC signed a 4,800 SF lease at 1225 S

HLC Deal

Main Street, Grapevine.

DEALS IN THE MARKET • Copeland Tower – 126,602 SF Class B Office Building • Stadium Place – 84,216 SF Class B Office Building • Gramercy Center – 55,000 SF Class B Office Building • Brookside Office Park – 44,375 SF Class B Office Building • 1751 E Lamar Boulevard – 41,680 SF Class B Office Building • 14401 Statler Boulevard – 35,040 SF Class B Office Building • Northstar One – 24,050 SF Class B Office Building

LARGE EXISTING VACANCIES • 4200 Buckingham – 63,917 SF • State National Center – 73,671 SF • 15100 FAA Boulevard – 60,037 SF • Grapevine III – 58,110 SF • Airport Centre I – 82,416 SF

NORTH FORT WORTH SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(48,567)

(102,482)

14,689

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

19.2%

18.8%

7.5%

VITAL STATS 20.0%

500,000

400,000 16.0% 300,000 12.0%

U/C SF 364,000 Delivered SF Quoted Rates $21.05

vs. Prev. Qtr

vs. 12 Mths Ago

145,000

15,000

vs. Prev. Qtr

vs. 12 Mths Ago

23,940

vs. Prev. Qtr

vs. 12 Mths Ago

$20.26

$18.95

200,000

100,000

8.0%

0 4.0% (100,000)

0.0%

(200,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS “The Dallas Business Journal recently revealed the 26th annual Best Real Estate Deals and Southlake’s Granite Place at Southlake Town Square was named the Best Suburban Office, edging out Bethany East in Allen and Fourteen555 along the Dallas North Tollway for the award.” (MySouthlakeNews.com) Now having been open for one year, the building now houses ten tenants including Paces at Granite Place, Southlake’s first co-working and flexible office group. Occupying roughly 23,000 SF, the operation is already 60 percent leased after opening in March. The building itself boasts a robust amenity package including a corporate living room, shared conference rooms, landscaped courtyard with WiFi and covered parking in the adjoining parking garage. Hillwood has broken ground on the 200,000 SF built to suite facility in the 18,000 acre Alliance Texas development for Mercedes-Benz Financial Services. The building, designed by BOKA Powell, will incorporate sustainable features such as daylighting and drip irrigation for the grounds to remain in line with Hillwood’s design principles. The project is currently slated to deliver in early 2019.

TOP LEASE TRANSACTIONS • Coldwell Banker signed a 10,242 SF lease at Cedar HLC Deal

Ridge Office Park.

• Lockheed Martin signed a 48,491 SF lease at 5555 N Beach Street

DEALS IN THE MARKET • 534 N Main Street – 33,000 SF Class C Office Building • 5501 Alliance Gateway Freeway – 214,434 SF Class A Office Building

• 2800 Meacham Boulevard – 39,381 SF Class B Office Building • 4775 North Freeway – 21,417 SF Class B Office Building • 5751 Kroger Drive – 71,021 SF Class B Office building. • 415 S Kimball Avenue – 21,500 SF Class B Office building.

NEW DEVELOPMENTS • 108 Countryview Drive – 30,000 SF Class B office building set to deliver December 2018. • Charles Schwab Corporate Campus – 500,000 SF Class A office building set to deliver May 2019. • Mercedes-Benz Financial Services – 200,000 SF Class A office building set to deliver March 2019. • 10280 North Freeway – 88,000 SF Class B Office Building set to deliver June 2018.

LARGE EXISTING VACANCIES • Solana, Westlake – 1,319,040 SF across 9 Buildings • 5555 N Beach Street – 424,218 SF • 5401 N Beach Street – 431,579 SF • 2601 Meacham Blvd – 268,290 SF • 5501 Alliance Gateway Freeway – 161,000 SF • Alliance CC 5 – 93,764 SF

PRESTON CENTER SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

40,059

11,258

(16,156)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.8%

13.7%

10.9%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

119,000

171,583

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$39.37

$36.41

119,000 Delivered SF Quoted Rates $40.24

VITAL STATS 14.0%

250,000

200,000 12.0%

150,000

100,000 10.0% 50,000

8.0%

(50,000)

6.0%

(100,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy Source: CoStar 2018 1Q Office Report

CURRENT EVENTS • Dallas was 1 of 20 cities to make the shortlist for Amazon’s HQ2, the e-commerce company announced Thursday. This list was trimmed down from the 238 cities that sent proposals. Amazon has pledged a $5 billion investment into the development that will add about 100,000 new jobs. A final decision is expected this year. • A new report from global real estate firm CBRE highlights that approximately half of the 4.4 million square feet of office space under construction in DFW is already leased. Analysts have a positive outlook for 2018 and expect vacancy rates to remain strong. Uptown and Preston Center boast the strongest vacancy rates at 12.8% and 10.6% respectively.

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

LARGE EXISTING VACANCIES • The Terraces at Douglas Center/5960 Berkshire Lane – 110,297 SF

• Highland Park Place/4514 Cole Avenue – 26,084 SF • 3890 W Northwest Highway/Bluffview Towers East – 18,719 SF

• 5956 Sherry Lane/Sherry Lane Place – 15,700 SF • 8115 Preston Road/Preston Commons East – 15,477 SF

TOP LEASE TRANSACTIONS • Eagle Materials signed a 44K SF lease in The Terraces at Douglas Center. • Berkadia signed a 17.2K SF lease in The Terraces at Douglas Center. • Stifel, Nicolaus & Company, Inc. signed a 13.3K SF lease in Sherry Lane Place. • Shepherd Royalty signed a 7.4K SF lease in Sterling Plaza.

DEALS IN THE MARKET There are currently no deals in the market at this time.

RICHARDSON/PLANO SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

104,434

429,561

(184,907)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

21.1% U/C SF 614,500 Delivered SF 79,014 Quoted Rates $24.66

21.3%

22.2%

vs. Prev. Qtr

vs. 12 Mths Ago

489,514

748,697

vs. Prev. Qtr

vs. 12 Mths Ago

125,137

52,670

vs. Prev. Qtr

vs. 12 Mths Ago

$24.62

$24.13

VITAL STATS 2,000,000

23.0%

22.0%

1,500,000

21.0% 1,000,000 20.0% 500,000 19.0% 0 18.0% (500,000)

17.0%

16.0%

(1,000,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS • EdgeCore Internet Real Estate has filed plans for a 900,000 square-foot campus along Shiloh Road in Richardson. The plan is for 2 office buildings and a distribution center all over 300,000 SF. Richardson will vote on the plan this week. • Development company KDC will have a groundbreaking ceremony on January 17 to kick off the construction for the new Independent Bank headquarters in McKinney. The 150,000 SF complex will be the first phase of a nearly 400,000 SF complex for the McKinney-based bank. • The $100 million redo of the old Texas Instruments campus in Plano has inked their first office tenants. The 20 & Roland Technology Group have leased a 23,000 SF office space in the new campus that sits at US 75 and Legacy Drive. The new redevelopment also includes apartments, retail & hotel rooms.

TOP LEASE TRANSACTIONS • Verado Energy, Inc. signed an 8.9K SF lease in One Bethany at Watters Creek East • RFJ Auto signed a 6.5K SF lease in Atrium at Collin Ridge • OMAC signed a 4.4K SF lease at 2929 NCX • RTI Community Management signed a 3.6K SF lease in The Office Campus at Allen • Avatar Healthcare Inc. signed a 3.5K SF lease at 100 N Central Expressway

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

• The Forum at Central – a 101,232 SF Class B office building.

• Promenade Tower – a 221,404 SF Class B office building.

• Greenway Plaza II – a 152,969 SF Class A office building.

NEW DEVELOPMENTS • One Bethany at Watters Creek – a 120,976 SF spec by Kaizen Development Partners

LARGE EXISTING VACANCIES • 601 Data Drive – 433,452 SF • 3400 N Central Expressway – 300,000 SF • 465 Independence Parkway – 251,347 SF • 3300 E Renner Road – 219,787 SF • Campbell Glenn II/1125 E Campbell Road – 205,820 SF

SOUTHWESTINTELLIGENCE FORT WORTH SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(46,976)

74,279

45,127

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

10.4%

10.0%

10.5%

U/C SF 232,417 Delivered SF Quoted Rates $23.81

vs. Prev. Qtr

vs. 12 Mths Ago

184,497

62,886

vs. Prev. Qtr

vs. 12 Mths Ago

181,781

vs. Prev. Qtr

vs. 12 Mths Ago

$23.50

$23.39

VITAL STATS 200,000

12.0%

150,000

11.0%

100,000 10.0% 50,000 9.0% 0 8.0%

(50,000)

7.0%

(100,000) Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy Source: CoStar 2018 1Q Office Report

CURRENT EVENTS WALSH RANCH - Not long ago, when travelers ventured beyond Loop 820, the skies opened and cattle bedecked the landscape, forming a veritable gateway to rural West Texas. Today, that area of far west Fort Worth is quickly becoming one of the most popular residential developments in North Texas. The Walsh area, about 14 miles west of downtown Fort Worth, is bucking a national trend. While the rest of the United States is coping with a housing shortage that is driving up prices and forcing some prospective buyers to wait, Walsh is building houses at a rate of about one per day. Walsh features 11 square miles that used to be part of the family owned Walsh Ranch. It straddles Interstates 20 and 30, wedged between west Fort Worth’s older neighborhoods and Aledo. Walsh is attractive not only for the wide range of homes — with 12 builders offering structures ranging from the upper $200,000s to nearly $800,000 — but also for the amenities. The neighborhood is expected to eventually be home to roughly 50,000 people, although full build out could take up to 50 years. But residents who have already bought property can already enjoy many of the master-planned amenities. WATERSIDE: The Fort Worth Zoning Commission dealt a potential setback Wednesday to the developers of Waterside, voting to recommend denial of the first hotel planned for the $170 million residential and retail project in southwest Fort Worth. Fort Worth-based Trademark Property Co. was seeking a required zoning amendment because where the hotel would sit — on a 3-acre tract along an old channel of the Clearfork of the Trinity River, behind a drill site at the southwest corner of Arborlawn Drive and Bryant Irvin Road — is within 1,000 feet of eight homes in the Edwards Ranch Riverhills subdivision on the east side of Bryant Irvin.

TOP LEASE TRANSACTIONS • Cook Children’s – Wilcox Plaza Class A Owner Occupant Purchase – 190,000 SF, Occupying 119,000 SF • Aspen Oil & Gas signed a 7,450 SF lease on the 6th floor at 6777 Camp Bowie Boulevard.

HLC Deal

DEALS IN THE MARKET • Pier One – 410,000 RSF Class A Office Tower • One West 7th – 110,000 RSF Class A Office Complex NEW DEVELOPMENTS • None (All Delivered) LARGE EXISTING VACANCIES • Pier One – 103,000 SF Class A Sublease Vacancy • Summit Office Park – 47,000 SF Class B Direct Vacancy • Western Place I & II – 42,000 SF Class B Direct Vacancy

• University Centre I&II – 37,500 SF Class A Direct Vacancy

• 4200 Hulen – 30,000 SF Class B Direct Vacancy

STEMMONS SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(129,436)

19,527

17,425

Vacancy

vs. Prev. Qtr

200,000

28.5%

150,000

vs. 12 Mths Ago

28.0%

100,000

27.5%

50,000

27.0%

26.5%

(50,000)

26.0%

(100,000)

25.5%

(150,000)

25.0%

(200,000)

24.5%

(250,000)

26.8%

25.7%

26.6%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

63,000

vs. Prev. Qtr

vs. 12 Mths Ago

Delivered SF Quoted Rates $16.96

VITAL STATS 29.0%

vs. Prev. Qtr

vs. 12 Mths Ago

$16.69

$15.63

(300,000)

24.0% Q1 15

Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS

NEW DEVELOPMENTS

Forest City Realty and Trademark Property have joined forces to bring a mixed-use project along the Trinity River. In all, the 42-acre site on both sides of the Margaret Hunt Hill bridge will bring retail, multifamily and office space if the plans are approved. The two firms currently have the land under contract to purchase.

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

TOP LEASE TRANSACTIONS • Teaching Trust signed a 15.4K SF lease in Woodview Tower.

• AMX Companies signed a 6K SF lease in Northbrook Atrium Plaza.

DEALS IN THE MARKET • Optima Business Park – a 197,958 SF Class B office complex

• Brookhollow Place – a 127,544 SF Class B office building

• One Empire Place – a 31,230 SF Class B office building

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

• The Connection at 8600/8600 Harry Hines Boulevard – 200,000 SF • 1430 Empire Central Dr. – 160,000 SF • Comerica Service Center/1508 W Mockingbird Lane – 142,600 SF • Infomart/1950 N Stemmons Freeway – 117,822 SF

SUBMARKETUPTOWN INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

105,205

188,822

(38,598)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.5%

12.4%

12.2%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,305,014

1,273,530

1,175,014 Delivered SF 130,000 Quoted Rates $38.35

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$38.14

$37.68

VITAL STATS 16.0%

800,000 700,000

15.0%

600,000 500,000

14.0%

400,000 300,000

13.0% 200,000 100,000

12.0%

0 (100,000)

11.0%

(200,000) 10.0%

(300,000) Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Absorption

Q3 16

Q4 16

Deliveries

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Vacancy

Source: CoStar 2018 1Q Office Report

CURRENT EVENTS • Prescott Realty Group has plans for a new three building development at 2727 Turtle Creek in Uptown. The firm announced plans to convert the old Republic Insurance buildings into a five-star hotel, multifamily and office project on the tract of land adjacent to the Mansion on Turtle Creek Hotel.

• 2601 Victory Avenue – a proposed 347,892 SF office building with Hillwood

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

• The Connection at 8600/8600 Harry Hines Boulevard – 200,000 SF

TOP LEASE TRANSACTIONS • Dentons signed a 25K SF renewal in 2000 McKinney. • McKool Smith, P.C. signed a 20K SF renewal in The Crescent.

• 1430 Empire Central Drive – 160,000 SF • Comerica Service Center/1508 W Mockingbird Lane – 142,600 SF • Infomart/1950 N Stemmons Freeway – 117,822 SF

• Stephens, Inc. signed a 17.5K SF renewal in 300 Crescent Court. • Savoya signed a 15K SF lease in Advancial Tower. • Nicholas Residential signed a 2.3K SF lease in 2811 McKinney.

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

NEW DEVELOPMENTS • PWC Tower – 494,300 SF office building with Trammel Crow Company • The Union – 418,132 SF office building with RED Development, LLC • 2850 N Harwood Street, No. 10 – 231,098 SF office building with Harwood International • Victory Center – a proposed 455,526 SF office building with Hines • 3001 Turtle Creek Boulevard – a proposed 326,682 SF office building with Hillwood 21

DALLAS

5055 Keller Springs Road Suite 300 Addison, Texas 75001 T 972.241.8300 F 972.241.7955

FORT WORTH

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

HOUSTON

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