MB Real Estate's 2011 ist Quarter Chicago Market Overview by MB Real Estate

F I R S T Q U A R T E R

2 011

CHICAGO MARKET OVERVIEW

F I R S T Q UA R T E R

2 011 CHICAGO MARKET OVERVIEW

TABLE OF CONTENTS SE CT ION ONE

CHICAGO ECONOMY 01 Economic Analysis SE CT ION T WO

CHICAGO CENTRAL BUSINESS DISTRICT 02 CBD Executive Summary SUPPLY

03 New Developments 04 Sublease Space 05 Large Blocks of Direct Availability DEMAND

06 Vacancy Rates 07 Large Deals 08 Absorption FEATURES

09 10 11 12 13

Lease Comparables Investment Sales Forecast Submarket Map Market Statistics

SE CT ION T H RE E

SUBURBAN CHICAGO 14 Suburban Chicago Executive Summary T h e C h ic a g o M a r ke t O v e r v i e w i s p ubl i s h e d q u a r t e r l y by M B R e a l E s ta te. To o b t a in ad d i ti o n a l co pi e s o r fo r fur the r in f or ma ti o n , p l e a s e c o nta c t:

KRYS TA BAV LS IK Manager of Research and Analytics or JAC K G AV IN Research Coordinator 1 8 1 We st M a d i s o n S tre e t, S ui te 4 7 0 0 Ch ic a go, I l l i no i s 6 0 6 0 2 (312) 726-1700

SUPPLY

15 New Developments 16 Sublease Space 17 Large Blocks of Direct Availability DEMAND

18 Vacancy Rates 19 Large Deals 20 Absorption FEATURES

21 22 23 24 25

Gross Asking Rents Investment Sales Forecast Submarket Map Market Statistics

w w w. m b r e s . c o m SE CT ION FOUR

ADDITIONAL INFORMATION 26 Glossary 27 About MB Real Estate

CHICAGO ECONOMY ECONOMIC ANALYSIS The Chicago-Joliet-Naperville, IL-IN-WI Metropolitan Statistical Area (MSA) remains in recession despite positive headlines circulating the nation. While the MSA is the business center of the Midwest and has a well-educated workforce, it is highly dependent on slow-growing and mature industries. According to a Manpower Survey, most Illinois employers expect to maintain staffing levels this year and not add to payrolls, which further hampers the outlook. Without new jobs, economic growth is not likely to translate into increased office occupancy. Total employment in the Chicago MSA declined 7.46 percent peak-to-trough and has only rebounded 1 percent since hitting its low in December 2009.

C H I C A G O E C O N O M I C A N A LY S I S

SECTION ONE

The consumer also impacts office sector demand. The housing market continues to hit new lows, significantly impacting consumer balance sheets. Consumers are losing some of their spending capacity to rising oil prices. To the detriment of the sector, many of the companies that occupy office space rely on consumer demand for their goods and services. Despite the massive headwinds, World Business Chicago has identified 38 firms that have located within or expanded in Chicagoland since the beginning of the year. While many tenants are still consolidating and contracting, the signs of new growth are promising. Chicago’s employment losses have yet to filter through the office market The Chicago MSA's economy calls for continued occupancy reductions. Compared to last quarter, the performance in the first quarter was closer to MB Real Estate's expectations. Underutilized space, often termed “shadow vacancy,” remains the biggest risk to the market. Many companies currently lease more space than necessary after reducing their headcount during the recession. Due to long-term leases, their commitment to this excess space takes years to expire. Upon expiration, many tenants are choosing to contract their space or consolidate locations to align with their needs, a process that will take several more years to filter through the market. The largest factor that distorts the correlation between office occupancy and employment is confidence. If businesses are confident of future expansion, they may lease or renew space ahead of necessity. Attractive lease terms may further entice tenants to act in advance. MB Real Estate’s baseline office forecast still expects a substantial decline in occupancy over several upcoming quarters to correlate with job losses. An alternative downside scenario, which is increasingly plausible, is that declines in occupancy will be small but continue until the long-term effects of the recession fully materialize. An optimistic scenario points to the relatively flat quarter and previous positive one in the Central Business District (CBD) as an early sign of a turning point, where rental rates have fallen enough to warrant expansion for some tenants before it is justified by employee headcount. Sources: MBRE Research, BLS, Chicago Sun-Times, Crain’s Chicago Business, Financial Times, Moody’s Economy.com, National Real Estate Investor

CHICAGO EMPLOYMENT WELL BELOW PEAK

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

CENTRAL BUSINESS DISTRICT EXECUTIVE SUMMARY While leasing activity was robust, expansions and new demand were matched by contractions and move-outs during the first quarter. The net result for Chicago's CBD was flat demand with minimal negative absorption. Key Indicators: • Groupon's short-term expansion at 303 East Wacker in the East Loop points to the CBD's ability to attract companies with growth potential. This was the largest lease of the quarter and prevented absorption from being significantly negative.

CENTRAL BUSINESS DISTRICT

SECTION TWO

• Four proposed office developments were actively marketed during the quarter. While fundamentals do not point to a need for a new tower, the amount of Class A large blocks of direct availability is constrained. • As expected, total sublease availability declined during the quarter. While space can enter the sublease market at any time, the period of extreme distress is over and companies are decreasingly apt to dump space. • The investment sales market continues to be active with a flurry of new offerings this quarter. While two assets are under contract, none closed during this period. • Risks to the outlook include shrinking space requirement per employee, reduced storage needs due to digital archiving, increasing use of telecommuting, and the GSA's elimination of underutilized space. All tenants’ underutilized space remains the biggest concern to the outlook of the market. Among tenants tracked with near-term lease expirations, many will be downsizing from their current footprint. This will lead to prolonged weakness in the market, according to the baseline forecast. • The CBD remains increasingly attractive for suburban tenants evaluating relocation alternatives. The Chicago MSA contains many of the country's fastest-growing companies. Lingering effects of the recession are expected to cause the direct vacancy rate to rise to almost 17 percent by 2012.

CBD VACANCY AND YEAR-TO-DATE ABSORPTION SUMMARY Direct Vacancy 1Q2011 Central Loop East Loop N. Michigan Ave. River North South Loop West Loop CBD Chicago Total Net Absorption 1Q2011 Central Loop East Loop N. Michigan Ave. River North South Loop West Loop CBD Chicago Total

A 9.5% 28.3% 19.6% 16.6% 13.2% 15.4% 15.3%

Change from 4Q2010 -0.7% 3.3% 0.8% 1.1% 3.8% -0.5%

0.1%

Change from 4Q2010

17.3% 23.5% 23.0% 8.9%

0.6% -0.2% 0.2% -1.1%

13.2% 17.8%

-0.4%

0.0%

C 15.2% 13.9% 13.1% 13.9% 25.7% 17.8% 15.3%

Change from 4Q2010 1.3% 0.2% 0.0% -0.5% 0.1% -0.9%

0.1%

Total

Change from 4Q2010

13.9% 20.8% 18.6% 13.4% 20.2% 15.3% 16.1%

0.3% 0.6% 0.4% -0.2% 1.6% -0.5% 0.1%

Total

100,710 (126,476) (28,869) (46,845) (38,654) 151,534 11,401

(43,301) 48,748 (6,369) 67,225

(119,986) (32,949) (13,706) (5,681) (15,377) 44,544 (143,155)

( 62,577) ( 110,677) ( 48,944) 14,698 ( 54,031) 237,258 (24,273)

41,180 107,482

Numbers in parentheses are negative

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Four buildings are actively marketing to tenants but demand is still weak

• Four proposed developments are actively marketing to tenants in the CBD, while numerous other sites have been identified. Although the vacancy rate is well above an equilibrium level, the low number of Class A options for tenants above 200,000 square feet may induce one or more to commit to anchoring a new building.

• OUTLOOK: The estimated net rent needed to justify a new building is 75 to 100 percent greater than the average of Class A initial rents. Furthermore, construction prices are expected to rise in conjunction with oil prices. Therefore, tenants will need to have a strong preference for a new building when significant discounts to peak pricing can be found in existing space.

2000 - 5 Properties 2001 - 2 Properties 2002 - 2 Properties 2003 - 0 Properties 2004 - 1 Property 2005 - 2 Properties 2006 - 2 Properties 2007 - 0 Properties 2008 - 2 Properties 2009 - 3 Properties 2010 - 1 Expansion Total - 20 Properties

2,870,576 904,436 2,236,364 0 1,300,000 2,500,143 1,320,498 0 728,254 3,652,913 933,710

sf sf sf sf sf sf sf sf sf sf sf

95.8% 86.9% 94.6% 0.0% 100.0% 97.4% 96.9% 0.0% 70.6% 81.4% 92.9%

16,446,894 sf

UNDER CONSTRUCTION

% Leased

S U P P LY

• Two of the proposed buildings are relatively small and would need only one large anchor to obtain construction financing, while two are much larger. The Alter Group and White Oak Realty are proposing a 490,000 square foot tower at 625 West Adams, while Fifield and CB Richard Ellis are proposing a 350,000 to 425,000 square foot building at 601 West Monroe. On the other side of the spectrum, Trammell Crow and Insite Real Estate are marketing a 1 million square foot tower at 301 South Wacker. Hines is trying to revive the development at 444 West Lake, which was sufficiently pre-leased but fell apart when the recession began.

% Leased (Avg)

2000 - 2010 INVENTORY ADDITIONS

CENTRAL BUSINESS DISTRICT

NEW DEVELOPMENTS

N/A Total

0 sf

2000-2011 INVENTORY ADDITIONS Delivered (2000-2010) Delivered (2011)

16,446,894 sf 0 sf

Total Under Construction Proposed Inventory

16,446,894 sf 0 sf 3,015,000 sf

Total

3,015,000 sf

NEW DEVELOPMENT HALTED; DEMAND FLAT

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Total sublease space falls as expected; decreases should continue

• Total sublease space resumed its decline after an unexpected increase last quarter. Total sublease availability fell 130,000 square feet (3.7 percent) to its current level of 3.4 million square feet. • Total space available among large sublease blocks increased during the quarter. At the John Hancock building at 875 North Michigan, PricewaterhouseCoopers (PwC) listed a 68,000 square foot block. This is former Diamond Consulting space, a company which PwC recently acquired. • OUTLOOK: Sublease space availability is expected to gradually decrease as tenants sign discounted subleases and direct leases expire. Over 1 million square feet of sublease space must still be burned off before equilibrium levels are reached.

CENTRAL BUSINESS DISTRICT

SUBLEASE SPACE

YEAR-END HISTORIC SUBLEASE AVAILABILITY: STEADILY DECREASING S U P P LY

LARGE BLOCKS (OVER 50,000 SQUARE FEET) OF SUBLEASE SPACE CURRENTLY AVAILABLE CLASS A Building Address

Size (sf)

Occupancy

Expiration

Floor(s)

Sublandlord

200 E Randolph St 200 E Randolph St 875 N Michigan Ave 203 N LaSalle St 233 S Wacker Dr

296,247 95,103 68,372 57,266 50,586

Vacant Vacant Vacant Vacant Negotiable

December 2011 December 2013 June 2014 August 2017 August 2014

53-61 14-16 28-30 15-16 14

Kirkland & Ellis AON Corporation PricewaterhouseCoopers DLA Piper SNR Denton

Total - 5 Spaces

567,574

CLASS B Building Address

Size (sf)

Occupancy

Expiration

Floor(s)

Sublandlord

225 W Randolph St 231 S LaSalle St 600 W Chicago Ave 680 N Lake Shore Dr 222 N LaSalle St 2 N LaSalle St 205 N Michigan Ave

238,778 126,439 117,101 95,523 78,974 78,660 77,437

March 2011 November 2011 Vacant Negotiable January 2012 Vacant Vacant

December 2022 June 2023 November 2015 August 2022 May 2014 July 2016 July 2013

22-30 6-9 2 15-16 17-18 Mezz-3 29-32

AT&T Bank of America Level 3 Communications Playboy Enterprises Merrill Lynch Computershare Unilever

Total - 7 Spaces

812,912

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Very large blocks are constrained, but numerous 50-100,000 square foot blocks are available

• The total number of large blocks fell by three this quarter while their combined square footage decreased by 100,000 to 8.1 million square feet. • The newly named PNC Centre at 1 North Franklin leased a large block this quarter when PNC Bank expanded and Walker Wilcox Matousek signed an almost 35,000 square foot lease. Consequently, Walker Wilcox Matousek’s relocation created a large block of availability at 225 West Washington.

• At 321 North Clark, law firm Howrey dissolved itself in mid-March and vacated two floors of space combining to form a 60,000 square foot block. • MB Real Estate has identified 40 tenants seeking at least 50,000 square feet in the CBD. Considering that there are 76 blocks available, there is a clear glut of space in the market. When considering blocks of 200,000 square feet or more, there are only six spaces compared to eight tenants of such size. While these tenants also have the possibility to renew, this segment of the market is the most constrained. CLASS B Building Address 330 N Wabash Ave 303 E Wacker Dr * 111 E Wacker Dr * 55-65 E Monroe St 130 E Randolph St * 333 S Wabash Ave * 120 S LaSalle St 350 W Mart Ctr 205 | 225 N Michigan Ave 101 N Wacker Dr 330 N Wabash Ave ** 1 N Dearborn St 231 S LaSalle St 225 N Michigan Ave 135 S LaSalle St 33 W Monroe St 200 N LaSalle St ** 525 W Monroe St * 303 E Wacker Dr 180 N LaSalle St 222 N LaSalle St 125 S Wacker Dr 55 W Monroe St 130 E Randolph St 401 N Michigan Ave 222 Merchandise Mart Plz 26 Blocks

Size (sf)

Submarket

371,945 241,206 202,086 189,194 185,042 163,800 139,348 126,535 120,446 101,917 97,932 97,261 91,962 78,498 75,524 72,385 71,728 67,282 61,503 59,804 58,908 55,405 55,063 52,224 51,870 50,000 2,938,868

North Michigan Avenue East Loop East Loop East Loop East Loop East Loop Central Loop River North East Loop West Loop North Michigan Avenue Central Loop Central Loop East Loop Central Loop Central Loop Central Loop West Loop East Loop Central Loop Central Loop West Loop Central Loop East Loop North Michigan Avenue River North

200 E Randolph St 500 W Monroe St 233 S Wacker Dr 540 W Madison St 10 S Wacker Dr 300 E Randolph St 111 W Illinois St 30 S Wacker Dr 200 S Wacker Dr 500 W Monroe St * 500 W Madison St 333 W Wacker Dr * 227 W Monroe St 455 N Cityfront Plaza Dr 353 N Clark St 233 S Wacker Dr 333 W Wacker Dr 1 S Wacker Dr 30 S Wacker Dr 233 S Wacker Dr 180 N Stetson Ave 155 N Wacker Dr 227 W Monroe St 10 S LaSalle St 77 W Wacker Dr 875 N Michigan Ave 353 N Clark St 980 N Michigan Ave 321 N Clark St 233 S Wacker Dr 875 N Michigan Ave 222 W Adams St 225 W Washington St 181 W Madison St 155 N Wacker Dr 10 S Wacker Dr 36 Blocks

Size (sf)

Submarket

415,075 369,207 314,833 161,028 156,134 142,123 141,503 114,192 112,929 106,475 92,924 92,830 90,286 90,207 83,055 82,393 80,736 77,961 75,892 74,806 73,644 71,055 70,053 68,937 67,342 66,387 62,390 62,384 61,431 60,817 60,610 59,436 56,265 56,199 55,298 54,175 3,881,012

East Loop West Loop West Loop West Loop West Loop East Loop River North West Loop West Loop West Loop West Loop West Loop West Loop North Michigan Avenue River North West Loop West Loop West Loop West Loop West Loop East Loop West Loop West Loop Central Loop Central Loop North Michigan Avenue River North North Michigan Avenue River North West Loop North Michigan Avenue West Loop West Loop Central Loop West Loop West Loop

Size (sf)

Submarket

157,694 121,149 110,898 102,943 92,921 87,544 86,171 83,612 82,971 78,000 76,855 73,294 71,254 57,800 1,283,106

West Loop East Loop East Loop Central Loop Central Loop East Loop West Loop Central Loop Central Loop South Loop East Loop North Michigan Avenue West Loop West Loop

S U P P LY

• University HealthSystem Consortium’s lease at 155 North Wacker broke up one of the three remaining large blocks at the recently constructed building.

CLASS A Building Address

CENTRAL BUSINESS DISTRICT

LARGE BLOCKS OF DIRECT AVAILABILITY

CLASS C Building Address 400 S Jefferson St 1 S State St 401 S State St 111 W Jackson Blvd 79 W Monroe St 1 N State St 564 W Randolph St 111 W Jackson Blvd 11 S LaSalle St 619 S LaSalle St 360 N Michigan Ave * 740 N Rush St 600 W Van Buren St 111 N Canal St 14 Blocks

Italicized addresses indicate space is new on the market * Block of space is for future occupancy **Block of space will be vacated in the upcoming quarter

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Change in vacancy is negligible; market is stagnant

• The direct vacancy rate rose 0.1 percent from last quarter to 16.1 percent due to the slightly negative absorption that the CBD experienced. The total vacancy rate, including sublease space, actually fell this quarter due to the improvement in the sublease market. • Overall, movement is not significant, indicative of a flat quarter. While many tenants continued to downsize, expansions from tenants like Groupon kept occupancy from falling significantly. • All submarkets experienced an increase in vacancy except River North and the West Loop. These continue to be the CBD’s strongest submarkets due to availability of new, premier space and proximity to commuter trains respectively.

CENTRAL BUSINESS DISTRICT

VACANCY RATES

• OUTLOOK: MB Real Estate expects direct vacancy to continue to rise as leases expire and companies reduce their space requirements.

HISTORIC YEAR-END DIRECT VACANCY: UP SLIGHTLY FROM LAST QUARTER DEMAND

HISTORIC YEAR-END VACANCY MARKET STATISTICS BY BUILDING CLASS: CLASS A HAS IMPROVED

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Velocity remains elevated with numerous expansions

• Groupon’s expansion at 303 East Wacker dominated headlines this quarter. The daily deal website expanded by more than 150,000 square feet. While this supported the market, it is only a short-term lease expiring May 2012. • External demand entered the CBD in the form of two deals. University HealthSystem Consortium is moving from the suburbs to 155 North Wacker. Steelmaker Evraz North America is moving its headquarters from Portland, OR to the AON Center at 200 East Randolph. • Internal growth was also a large factor as numerous firms expanded during the quarter. While often coupled with renewals, 12 transactions resulted in additional occupancy for the CBD, which contrasts to the increasing vacancy rate and well-below peak employment levels in the Chicago MSA.

CENTRAL BUSINESS DISTRICT

LARGE DEALS

• In one of the few contractions, Crain Communications will reduce its footprint when it relocates within the East Loop from 360 North Michigan to 150 North Michigan. DEMAND

• OUTLOOK: Leasing velocity is expected to remain elevated as tenants can no longer delay real estate est decisions. MB Real Estate identified 87 tenants larger than 20,000 square feet that are active in the market, compared to 65 last quarter.

LARGE LEASE TRANSACTIONS NEW Tenant

Type

Submarket

Building Address

Size (sf)

Interpublic Group (GolinHarris/Weber Shandwick) University HealthSystem Consortium Crain Communications Westwood College Walker Wilcox Matousek Evraz North America Total - 6 Spaces

Relo New Relo Relo Relo New

North Michigan Ave West Loop East Loop East Loop West Loop East Loop

875 N Michigan 155 N Wacker 150 N Michigan 1 N State 1 N Franklin 200 E. Randolph

140,000 77,109 54,426 50,000 34,980 34,000 390,515

RENEWAL/EXPANSION/SUBLEASE Tenant

Type

Submarket

Building Address

Size (sf)

Groupon PNC Bank Tressler LLP Pierce & Associates ThoughtWorks Coyote Logistics Thomson Reuters AlphaMetrix Investment Advisors Morgan, Lewis & Bockius Stifel, Nicolaus & Co. Franczek Radelet P.C. Dex One Robert Morris College Humana Health Insurance of Chicago Bel Brands Rakoczy, Molino, Mazzochi & Siwik Collins Engineers Total - 17 Spaces

Ren/Exp Ren/Exp Ren/Exp Ren/Exp Ren/Exp Exp Exp Ren/Exp Ren/Cont Ren Ren/Exp Ren Exp Exp Sub Ren/Exp Ren/Cont

East Loop West Loop West Loop Central Loop East Loop NW Chicago Central Loop Central Loop West Loop Central Loop West Loop East Loop East Loop West Loop West Loop River North West Loop

303 E Wacker 1 N Franklin 233 S Wacker 1 N Dearborn 200 E Randolph 2545 W Diversey 1 N Dearborn 181 W Madison 77 W Wacker 70 W Madison 300 S Wacker 200 E Randolph 401 S State 550 W Adams 30 S Wacker 6 W Hubbard 123 N Wacker

196,189 116,000 83,000 77,883 52,569 41,000 40,695 38,743 36,379 36,225 36,113 34,000 33,544 27,638 27,200 24,000 20,000 921,178

Abbreviations: Cont - Contraction

Exp - Expansion

Relo - Relocation

Ren - Renewal

Sub - Sublease

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

West Loop continues to soar above other submarkets

• Although absorption was slightly negative at 24,000 square feet, the magnitude is so minor (0.02 percent of inventory) that demand can be considered flat. The West Loop remained attractive to tenants of all classes and posted strong positive absorption of 237,000 square feet during the quarter. The East Loop had the weakest performance despite Groupon’s large expansion. • In contrast to previous quarters, Class B space performed the strongest with more than 107,000 square feet of positive absorption. The flight to quality has filtered down into the Class B segment, perhaps enticed by the still increasing discounts in lease rates in that class. The Class A market was essentially flat, with Class C taking the brunt of the occupancy losses.

CENTRAL BUSINESS DISTRICT

ABSORPTION

• One significant risk to the sector involves the federal government’s office space plans. The Obama administration has ordered the GSA to reduce its portfolio to eliminate underutilized space. Over 12,000 buildings have been identified for elimination nationwide.

HISTORIC ABSORPTION: NEGATIVE DEMAND WILL CONTINUE

DEMAND

• OUTLOOK: Increasingly efficient floor plans, telecommuting, and reduced storage space are all long-term negatives that weigh on occupancy in the office market. Although jobs will eventually return, other obstacles await the office market.

HISTORIC ABSORPTION BY SUBMARKET: WEST LOOP AND RIVER NORTH POSITIVE

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Class A rates hold steady, but concessions increase; Class B and C continue to decline

• Lease metrics are compared on a four-quarter basis instead of calendar year, allowing full years of data comparison. • In the last four quarters, average Class A initial net rental rates for new transactions have stabilized. Renewal transaction rates have increased substantially, signaling tenants’ preference for renewal and landlords’ return to pricing power. Class B and C average initial net rental rates have continued their decline, signaling the still pervasive weakness in these segments. Abatement packages continue to increase. Historically, while less rent abatement has been given in a robust market, an average of one month per year has been given in weak markets. This period, the average abatement exceeds one month per year.

CENTRAL BUSINESS DISTRICT

LEASE COMPARABLES

• The average lease length has increased this period, signaling that tenants are willing to make longer term commitments.

• OUTLOOK: Class A rental rates will likely remain stable due to positive yet weak demand. Concessions will begin to decrease once this segment improves further. Class B and C space will need to continue to reduce rates in order to attract tenants.

AVERAGE LEASE TERMS ON NEW AND RENEWAL DEALS NEW DEALS

AVERAGE INITIAL RATE

AVERAGE TENANT IMPROVEMENT

AVERAGE ABATEMENT (MONTHS)

AVERAGE TERM (YEARS)

2Q2010 - 1Q2011

$19.82

$14.47

$10.96

$46.97

$24.73

$22.68

9.6

6.1

7.5

8.7

6.6

6.5

2Q2009 - 1Q2010

$19.79

$15.29

$11.97

$39.52

$26.87

$17.74

8.2

6.2

4.4

7.9

6.4

5.6

2Q2008 - 1Q2009

$22.26

$17.04

$13.85

$43.52

$38.87

$32.74

5.2

4.5

4.4

8.5

7.2

7.6

2Q2007 - 1Q2008

$19.40

$15.73

$12.25

$40.56

$38.87

$24.66

4.8

4.4

4.1

7.3

6.7

6.5

2Q2006 - 1Q2007

$18.12

$13.93

$15.39

$49.24

$38.58

$15.19

6.2

5.1

1.9

9.0

7.4

4.8

2Q2005 - 1Q2006

$18.09

$12.67

$10.25

$49.16

$38.58

$26.99

7.2

5.7

4.9

8.9

7.6

7.1

2Q2004 - 1Q2005

$16.67

$12.97

$10.05

$43.12

$42.53

$23.24

7.0

7.2

3.8

10.1

8.6

6.2

2Q2003 - 1Q2004

$17.22

$12.63

$9.43

$40.92

$36.90

$15.89

4.4

5.6

3.1

8.6

8.2

6.2

2Q2002 - 1Q2003

$22.02

$15.34

$11.84

$36.32

$33.66

$27.95

1.6

3.4

1.4

8.1

9.1

6.0

2Q2001 - 1Q2002

$22.65

$16.47

$16.61

$26.88

$27.08

$24.72

1.0

0.3

1.1

7.2

8.4

7.8

2Q2000 - 1Q2001

$21.85

$15.86

$15.42

$26.89

$23.60

$31.82

0.5

0.1

7.8

6.7

6.1

2Q1999 - 1Q2000

$20.60

$15.89

$12.26

$27.28

$27.03

$22.19

0.2

0.3

0.1

8.2

7.5

7.4

2Q1998 - 1Q1999

$18.44

$13.28

$17.23

$21.33

$27.72

$20.91

0.0

0.2

7.2

7.1

6.9

RENEWAL DEALS

AVERAGE INITIAL RATE

AVERAGE TENANT IMPROVEMENT

F E AT U R E S

• Tenant improvement allowances fell in the previous period because some landlords lacked capital, choosing instead to give increased abatement packages and lower rental rates to tenants. As improved financing availability works its way through the market, the average tenant improvement allowance has increased for Class A and C space, but abatement packages have remained steady.

AVERAGE ABATEMENT (MONTHS)

AVERAGE TERM (YEARS)

2Q2010 - 1Q2011

$20.28

$14.93

$10.35

$21.19

$10.49

$5.70

5.8

4.2

4.7

6.1

4.6

4.7

2Q2009 - 1Q2010

$17.91

$15.74

$11.56

$13.87

$10.47

$6.79

4.4

3.3

4.3

5.5

4.9

5.0

2Q2008 - 1Q2009

$21.72

$16.64

$15.36

$23.52

$15.27

$16.40

3.0

2.9

3.1

6.3

5.5

7.3

2Q2007 - 1Q2008

$20.16

$15.58

$13.57

$16.26

$16.88

$17.70

3.6

2.7

2.6

6.6

5.6

7.4

2Q2006 - 1Q2007

$16.07

$13.07

$16.68

$21.70

$17.72

$7.13

4.5

3.6

0.8

6.7

7.5

4.5

2Q2005 - 1Q2006

$16.12

$12.60

$14.39

$23.42

$15.16

$9.02

5.2

2.0

0.0

7.6

6.1

5.9

2Q2004 - 1Q2005

$16.44

$13.07

$10.12

$21.49

$23.76

$10.03

3.5

3.8

0.5

8.1

8.0

6.3

2Q2003 - 1Q2004

$18.54

$13.59

$10.27

$22.29

$17.23

$9.09

2.0

3.1

1.5

8.3

7.0

6.3

2Q2002 - 1Q2003

$22.24

$14.64

$14.50

$15.91

$15.12

$10.15

0.9

1.5

0.4

7.1

7.0

3.9

2Q2001 - 1Q2002

$22.53

$16.54

$12.16

$9.94

$9.25

$5.55

0.2

0.1

0.0

5.7

6.9

4.5

2Q2000 - 1Q2001

$22.43

$16.71

$15.82

$9.65

$10.98

$6.33

0.0

4.9

6.4

4.1

2Q1999 - 1Q2000

$20.77

$14.43

$14.36

$15.09

$14.00

$10.79

0.1

0.0

6.4

6.6

5.6

2Q1998 - 1Q1999

$19.86

$12.29

$12.07

$13.40

$14.02

$4.92

0.0

0.3

6.3

5.5

4.3

All rates are shown as net and do not include tax and operating costs for building. Numbers will be revised as new data are reported in subsequent quarters

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Sales offerings surge

• After a robust end to last year, sales offerings increased rapidly this quarter. In terms of square footage, more office buildings are currently on the market or under contract than traded in all of 2010. The sale of 600 West Chicago marks the first nondistressed Class B asset to trade in over a year. It is a premier asset in the Class B segment, which contains the headquarters of rapidly expanding Groupon. The building is under contract for $390 million, just under $250 per square foot. • Nationally, there has been a revival of the commercial real estate capital markets. The CMBS market has returned with nearly as many offerings year-to-date as 2010. Despite the robust capital markets, distress is still pervasive. The CMBS delinquency rate has risen to a record of 9.2 percent. The Moody’s Commercial Property Price Index, a repeat sales index, is still down 42.8 percent since peak.

CENTRAL BUSINESS DISTRICT

INVESTMENT SALES

• OUTLOOK: Sellers that tested the market at the end of 2010 successfully sold for capitalization rates that neared the peak of the market. If this trend continues, expect many more sales transactions as the CBD’s capital markets return to full swing.

Size (sf)

Price

Price per sf * Class Seller

Building Address

Sale Date

Status (Buyer or Listing Agent)

600 W Chicago

Under Contract (1Q11)

1,567,592

$390,000,000 $249

David Werner, Jacob & CommonWealth REIT Victor Gerstein

70 W Madison

New On Market

1,439,369

$340,000,000 $236

Hines Real Estate Investment Trust

Marketing (Eastdil Secured)

350 N Orleans 233 N Michigan 200 S Wacker

New On Market New On Market New On Market

1,208,000 980,362 754,751

$255,000,000 $211 $190,000,000 $194 -

B B A

Vornado Realty Trust Parkway Properties Behringer Harvard Holdings

Marketing (Eastdil Secured) Marketing (Eastdil Secured) Marketing (Holliday Fenoglio Fowler)

444 N Michigan 200 W Jackson

New On Market New On Market

516,797 476,711

$100,000,000 $193

B B

GLL Properties Apollo Investment Corporation

Marketing (Holliday Fenoglio Fowler) Marketing (Holliday Fenoglio Fowler)

29 E Madison 32 W Randolph 11 E Adams 68 E Wacker 215 W Ohio

New On Market New On Market New On Market New On Market New On Market

236,151 226,666 160,458 78,775 52,742

$19,500,000 -

$86 -

C C C C C

Winthrop Realty Trust David & Barbara Kalish Winthrop Realty Trust Sam Roti Bold Development

Marketing (Marcus & Millichap) Marketing (CB Richard Ellis) Marketing (Marcus & Millichap) Auction (Rick Levin & Associates) Marketing

111 W Jackson

1st Qtr 2011

528,104

$35,000,000

$66

P&S Limited Partnership

JV - David Werner & Berkley Properties

71 S Wacker 353 N Clark 300 S Riverside 225 W Washington

4th Qtr 2010 4th Qtr 2010 4th Qtr 2010 4th Qtr 2010

1,490,825 1,173,643 1,075,907 483,497

$625,000,000 $385,000,000 $189,000,000 $60,000,000

$419 $328 $176 $124

A A A A

Pritzker Realty Group Mesirow Financial Brookfield Prop. Avestus Capital Partners

Irvine Cos. Tishman-Speyer Properties L.P. David Werner and Joseph Mizrachi KTC Properties

65 E Wacker 79 W Monroe 820 S Michigan 238 S Wabash

4th Qtr 2010 4th Qtr 2010 4th Qtr 2010 4th Qtr 2010

220,000 199,824 127,153 90,312

$14,900,000 $68 ~$10,000,000 ~$50 $8,000,000 $63 -

C C C C

The Griffith Group Bank of America Johnson Publishing Cook County Sheriff

The Private Bank Farbman Corp. Columbia College LaSalle 115 Holdings

300 N LaSalle

3rd Qtr 2010

1,300,000

$655,000,000 $503

Hines Interests

KBS Realty Advisors

180 N LaSalle 29 N Wacker

2nd Qtr 2010 2nd Qtr 2010

770,191 129,792

$72,250,000 $94 $16,900,000 $130

B C

Prime Group Intercontinental Real Estate

Berkley Properties Sun Life Financial

F E AT U R E S

INVESTMENT SALES: ACTIVITY SOARS

Price per sf (square foot) - based off estimated selling price for new to market buildings

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Further occupancy losses are expected

As previously forecasted, negative absorption, albeit slight, resumed during the first quarter of 2011. Occupancy losses are expected to continue through 2012 to catch up with the vast reduction in employment that the Chicago MSA has experienced. Occupancy has decreased 1.3 percent since peak while total employment declined 7.5 percent peak-to-trough. Although changes in occupancy do not perfectly correlate with total employment, the Chicago CBD has considerable excess space that must be consolidated to match companies’ headcounts.

MB Real Estate's baseline forecast calls for more losses in 2011, decelerating into 2012. Long-term risks to the sector include shrinking space per employee, reduced storage needs due to digital archives, the increasing use of telecommuting, and the GSA's elimination of underutilized space.

Total Historic and Forecasted Inventory (sf)

Total Historic & Forecasted Occupancy (sf)

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

120,244,884 120,434,748 119,972,770 118,691,577 121,440,276 122,776,164 124,713,268 125,037,423 126,452,643 128,385,650 126,478,575 125,626,639 125,269,078 130,038,076 130,539,796 130,569,279 130,569,279

101,285,488 104,939,294 106,058,995 106,744,585 109,533,759 108,743,284 107,598,500 106,754,119 106,568,104 105,737,728 108,402,912 110,969,808 110,833,045 110,112,891 109,602,891 108,980,546 108,565,649

1996-2010 Absorption Avg:

605,567

YTD 2011 Absorption:

(24,273)

Direct Vacancy % 15.8% 12.9% 11.6% 10.1% 9.8% 11.4% 13.7% 14.6% 15.7% 17.6% 14.3% 11.7% 11.5% 15.3% 16.0% 16.5% 16.9%

F E AT U R E S

While employment losses typically equal occupancy losses on a percentage basis in the Chicago CBD, there are several influential factors this recession that will support the market: a) companies were conservative during the expansion, b) the CBD has generated new demand from the suburbs and other states, c) and a handful of tenants are rapidly expanding. Although vacancy increases are expected, the magnitude will be lower than the job market would suggest.

Year

CENTRAL BUSINESS DISTRICT

FORECAST

Total projected inventory based on addition of projects currently under construction Occupancy is forecast based on proprietary assumptions regarding the Chicago MSA’s total employment change and the office industry’s historical performance which trails the overall economy.

HISTORIC & PROJECTED VACANCY: OCCUPANCY WILL CONTINUE TO FALL

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

CENTRAL BUSINESS DISTRICT

SUBMARKET MAP

F E AT U R E S FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Direct Vacancy %

Total Vacancy Rate (Direct + Sublease) %

Occupancy (sf)

Sublease Vacancy (sf)

9.5%

12,252,042

392,661

12.4%

17.3%

11,545,218

516,441

21.0%

CENTRAL LOOP

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Class A

13,543,603

100,710

1,291,561

Class B

13,954,090

(43,301)

2,408,872

Class C

8,606,709

(119,986)

1,308,656

15.2%

7,298,053

131,860

16.7%

Total

36,104,402

(62,577)

5,009,089

13.9%

31,095,313

1,040,962

16.8%

EAST LOOP

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Direct + Sublease) %

Class A

3,988,544

(126,476)

1,129,397

28.3%

2,859,147

414,763

38.7%

Class B

10,195,934

48,748

2,397,117

23.5%

7,798,817

270,093

26.2%

8,514,582

(32,949)

1,183,837

13.9%

7,330,745

36,655

14.3%

Total

22,699,060

(110,677)

4,710,351

20.8%

17,988,710

721,511

23.9%

N. MICHIGAN AVE.

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Direct + Sublease) %

Class A

3,952,669

(28,869)

775,303

19.6%

3,177,366

120,207

22.7%

Class B

4,613,434

(6,369)

1,063,356

23.0%

3,550,078

139,146

26.1%

Class C

4,462,169

(13,706)

582,834

13.1%

3,879,335

62,322

14.5%

Total

13,028,272

(48,944)

2,421,493

18.6%

10,606,779

321,675

21.1%

RIVER NORTH

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Direct + Sublease) %

Class A

4,010,706

(46,845)

667,343

16.6%

3,343,363

138,182

20.1%

Class B

3,518,971

67,225

312,906

8.9%

3,206,065

225,771

15.3%

Class C

5,813,202

(5,681)

809,540

13.9%

5,003,662

117,700

16.0%

Total

13,342,879

14,698

1,789,789

13.4%

11,553,090

481,653

17.0%

SOUTH LOOP

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Direct + Sublease) % 13.2%

Class A

1,019,325

(38,654)

134,690

13.2%

884,635

Class C

1,310,113

(15,377)

336,508

25.7%

973,605

2,005

25.8%

Total

2,329,438

(54,031)

471,198

20.2%

1,858,240

2,005

20.3%

WEST LOOP

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Direct + Sublease) %

Class A

26,815,769

151,534

4,142,196

15.4%

22,673,573

664,871

17.9%

Class B

9,717,097

41,180

1,286,133

13.2%

8,430,964

178,098

15.1%

Class C

6,532,363

44,544

1,160,412

17.8%

5,371,951

34,639

18.3%

Total

43,065,229

237,258

6,588,741

15.3%

36,476,488

877,608

17.3%

TOTALS

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Direct + Sublease) %

Class A

53,330,616

11,401

8,140,490

15.3%

45,190,126

1,730,684

18.5%

Class B

41,999,526

107,482

7,468,384

17.8%

34,531,141

1,329,549

20.9%

Class C

35,239,138

(143,155)

5,381,787

15.3%

29,857,351

385,181

16.4%

Total CBD

130,569,279

(24,273)

20,990,661

16.1%

109,578,619

3,445,414

18.7%

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

F E AT U R E S

Class C

CENTRAL BUSINESS DISTRICT

MARKET STATISTICS

SUBURBAN CHICAGO EXECUTIVE SUMMARY Widespread negative absorption occurred during the first quarter in Suburban Chicago marking a return to the rapid pace of declining demand. In contrast to the CBD, much of the losses in occupancy have already filtered through the market, but further negativity is likely, especially as tenants such as United Airlines leave in favor of the CBD.

SUBURBAN CHICAGO

SECTION THREE

Key Indicators: • The direct vacancy rate increased in all classes and submarkets. The Class B market experienced the largest increase as the direct vacancy rate rose 0.7 percent to 26.6 percent. • Sublease availability decreased during the quarter. Several large blocks of sublease availability are due to expire by the end of the year, indicating that the total will continue to decline. • Leasing activity decreased from last quarter with fewer tenants choosing to renew. Of the transactions that closed during the quarter, few will result in increased occupancy for the market. • Within renewal transactions, the pharmaceutical industry showed robust activity in the North submarket. Astellas Pharma US and BioSante Pharmaceuticals expanded their office spaces upon signing renewal leases. • Unlike the CBD, there are no potential office developments making headlines. The only project underway is the build-to-suit headquarters for Astellas Pharma US in Glenview. • Investment activity was marked by several foreclosures. The market is not attracting nearly as many core investors as the CBD. Occupancy has decreased 6.6 percent in Suburban Chicago compared to a 7.5 percent peak-to-trough total employment loss. Underutilized space remains the biggest risk to the market because companies have leased more space than they need and will reduce square footage upon lease expiration.

SUBURBAN VACANCY AND YEAR-TO-DATE ABSORPTION SUMMARY Direct Vacancy 1Q2011 East-West North Northwest O'Hare Suburban Chicago Total Net Absorption 1Q2011 East-West North Northwest O'Hare Suburban Chicago Total

Change from 4Q2010

Total

Change from 4Q2010

21.2% 19.1% 20.6% 20.4% 20.4%

0.3% 0.2% 0.6% -0.1% 0.3%

23.5% 21.0% 33.0% 31.8% 26.6%

0.4% 0.2% 1.3% 0.9% 0.7%

23.8% 19.9% 29.9% 36.1% 26.6%

0.0% -0.8% 1.5% 0.7% 0.2%

22.3% 19.7% 25.3% 26.5% 23.1%

0.2% 0.1% 0.9% 0.4% 0.4%

Total

(43,817) (25,474) (112,921) 2,752 (179,460)

(65,434) (17,378) (138,315) (43,244) (264,371)

(1,999) 11,468 (30,636) (20,962) (42,129)

( 111,250) ( 31,385) ( 281,872) ( 61,454) (485,960)

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Lackluster demand does not warrant development

• With vacancy rising in Suburban Chicago, a multitude of options exists for tenants looking to expand or relocate. There is no demand for new construction as existing landlords aggressively compete for tenants. • Companies that demand new, premier space are the only exception and may build new space to suit their needs. Besides several noncompetitive medical office developments, the only office construction underway is the North American headquarters for Astellas Pharma US in Glenview. The development is a build-to-suit project with MB Real Estate managing the construction.

SUBURBAN CHICAGO

NEW DEVELOPMENTS

• The Bridge Development spec construction at 555 Aptakisic Road in Lincolnshire remains vacant since being completed at the end of 2009. It is evidence that almost no demand exists for speculative construction.

S U P P LY

• OUTLOOK: Suburban Chicago is not supply constrained. Numerous parcels are ready for development once demand warrants it, which will always keep rent growth to inflationary levels. Between shrinking occupancy and constrained financing, speculative development is unlikely for several years.

NEW DEVELOPMENT PIPELINE 2010 Deliveries Building Address

Size (sf)

% Leased

Submarket

Comments

1901 Chestnut Ave, Glenview

110,000

100.0%

North

9501 Technology Blvd, Rosemont

119,000

74.8%

O'Hare

Delivered September 2010. Build-to-suit Headquarters for General Board of Pension & Health Benefits for The United Methodist Church. Construction managed by MB Real Estate. Delivered April 2010. Rosemont Corporate Center. Tenants: Cisco, Skyline Advanced Tech. Developed by Ryan Companies.

85,000

100.0%

East-West

Delivered March 2010. Tenants: Delta Dental, Ryan Companies. Developed by Ryan Companies.

% Leased

Submarket

Comments

111 Shuman Blvd, Naperville

Total - 3 Propperties

314,,000

2011 Deliveries Building Address

Size (sf)

Total - 0 Propperties

Under Construction Building Address

Size (sf) % Pre-leased

1 Astellas Pky, Glenview

440,000

Total - 1 Proppertyy

440,,000

100.0%

Due Date

Comments

Fall 2012

Broke ground April 2010. Build-to-suit North American Headquarters for Astellas Pharma US. Construction managed by MB Real Estate.

Due Date

Comments

Proposed Building Address

Size (sf) % Pre-leased

T t l - 0 PProperties Total ti

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Total sublease availability substantially reduced

• As in the CBD, the total square footage of sublease availability resumed its decline in Suburban Chicago after increasing during the fourth quarter of 2010. The decrease was substantial at more than 340,000 square feet, corresponding to a change of 8.7 percent. The leases on four large blocks of sublease space will become directly available by year-end, further shrinking the sublease market.

SUBURBAN CHICAGO

SUBLEASE SPACE

• Among large blocks of sublease availability, the largest change came when SIRVA’s space in the East-West submarket at 700 Oakmont Lane became directly available. • OUTLOOK: When the market is at equilibrium, roughly 3 million square feet of sublease space is available. The current level needs to be reduced by an additional 600,000 square feet to reach this balance.

HISTORIC YEAR-END SUBLEASE AVAILABILITY: BELOW PREVIOUS RECESSION HIGHS S U P P LY

LARGE BLOCKS (OVER 50,000 SQUARE FEET) OF SUBLEASE SPACE CURRENTLY AVAILABLE Class A Building Address 3 Overlook Pt, Lincolnshire 4201 Winfield Rd, Warrenville 75 N Fairway Dr, Vernon Hills 1600 McConnor Pky, Schaumburg 1600 McConnor Pky, Schaumburg 1450 American Ln, Schaumburg 1200 Lakeside Dr, Bannockburn 410 Warrenville Rd, Lisle Total - 8 Spaces

Size (sf)

Occupancy

Expiration

Submarket

Sublandlord

290,143 249,996 150,258 86,919 80,760 65,259 63,328 60,434

Vacant Vacant Vacant Vacant Vacant Negotiable Vacant Vacant

February 2017 January 2016 December 2011 August 2011 August 2011 October 2016 August 2011 May 2013

North East-West North Northwest Northwest Northwest North East-West

Hewitt Associates Navistar Washington Mutual Ameriquest Mortgage Company Ameriquest Mortgage Company Zurich American Insurance Company RR Donnelley IKON Office Solutions

1,047,097

Class B Size (sf)

Occupancy

Expiration

Submarket

Sublandlord

6200 S Route 53, Lisle 5450 N Cumberland Ave, Chicago 750 N Commons Dr, Aurora

360,000 118,666 60,000

Vacant Negotiable Negotiable

July 2012 February 2020 September 2017

East-West O'Hare East-West

Telcordia Technologies Océ-USA Holding Inc Westell Technologies

Total - 3 Spaces

538,666

Building Address

Italicized addresses indicate space is new on the market

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Large space availabilities across all submarkets give tenants considerable choices

• The total number of large blocks increased by three to 93 during the quarter, although their total square footage decreased. This represents a reversal from last quarter but is a negligible change in terms of the larger market as it is clearly oversupplied. • Despite having fewer large blocks than the Northwest submarket (28) and the same number as the East-West submarket (26), the North submarket is the most oversupplied in terms of number of large blocks as a percentage of its total inventory.

CLASS B Building Address

City

1200 Warrenville Rd 2400 Cabot Dr * 28100 Torch Pky 1 Salem Lake Dr 544 Lakeview Pky 2350-2360 E Devon Ave 4 Corporate Dr 700 N Wood Dale Rd 3800 Golf Rd 703-709 W Algonquin Rd 4242 N Harlem Ave 800 Jorie Blvd 9801 W Higgins Rd 975 Meridian Lakes Dr 1501 Feehanville Dr 715-723 W Algonquin Rd 1245 Corporate Blvd 814 Commerce Dr 27545 Diehl Rd 1000 Lakeside Dr * 6400 Shafer Ct 1000 E Woodfield Rd 702-704 Deerpath Dr 2400 E Devon Ave 2850 W Golf Rd 5440 N Cumberland Ave 26 Blocks of Space

Naperville Lisle Warrenville Long Grove Vernon Hills Des Plaines Long Grove Wood Dale Rolling Meadows Arlington Heights Norridge Oak Brook Rosemont Aurora Mount Prospect Arlington Heights Aurora Oak Brook Warrenville Bannockburn Rosemont Schaumburg Vernon Hills Des Plaines Rolling Meadows Chicago

Size (sf)

Submarket

329,770 211,596 203,842 150,000 144,999 142,596 133,421 125,328 109,061 96,213 93,155 88,886 80,868 74,266 71,310 70,000 69,965 66,882 62,440 56,745 56,219 51,410 51,221 51,000 50,606 50,000 2,691,799

East-West East-West East-West Northwest North O'Hare North Northwest Northwest Northwest O'Hare East-West O'Hare East-West Northwest Northwest East-West East-West East-West North O'Hare Northwest North O'Hare Northwest O'Hare

Size (sf)

Submarket

208,900 195,393 75,996 53,790 534,079

Northwest Northwest North East-West

CLASS C Building Address

City

3501 Algonquin Rd 1299 Algonquin Rd 2-4-6 Genesee St 1950 S Batavia Ave 4 Blocks of Space

Rolling Meadows Schaumburg Waukegan Geneva

Italicized addresses indicate space is new on the market * Block of space is for future occupancy ** Block of space will be vacated during the upcoming quarter

City

51 W Higgins Rd * 1600 McConnor Pky * 1701 Golf Rd 21440 Lake Cook Rd 1200 Lakeside Dr * 700 Oakmont Ln 150 NW Point Blvd 1415 W Diehl Rd 4101 Winfield Rd 555 Aptakisic Rd 425 N Martingale Rd 1 Overlook Pt 1011 Warrenville Rd 3333 Beverly Rd ** 2895 Greenspoint Pky ** 8700 W Bryn Mawr Ave * 9700 W Higgins Rd 9525 W Bryn Mawr Ave 1701 Golf Rd 1333 Butterfield Rd 1707 N Randall Rd 1707 N Randall Rd 75 Tri State International * 25 Tri State International 8700 W Bryn Mawr Ave 1 Pierce Pl 5550 Prairie Stone Pky 1 Corporate Dr 850-860 Technology Way 18W140 Butterfield Rd ** 3333 Warrenville Rd 2655 Warrenville Rd 2800 W Higgins Rd ** 333 Knightsbridge Pky 2100 Sanders Rd 9500 W Bryn Mawr Ave * 200 Tri State International * 535 E Diehl Rd 1 Corporate Dr 300 Park Blvd 4201 Lake Cook Rd 1001 Warrenville Rd 2 Corporate Dr 150 E Pierce Rd 300 Knightsbridge Pky 540 Lake Cook Rd * 100 S Saunders Rd 2651 Warrenville Rd 2001 Butterfield Rd 2 Pierce Pl 1 Tower Ln 700 Commerce Dr 9500 W Bryn Mawr Ave * 2333 Waukegan Rd 18W140 Butterfield Rd 2100 Enterprise Ave 1700 E Golf Rd 7400 N Caldwell Ave 2701 Patriot Blvd 55 Shuman Blvd 1007 Church St * 1650 Lake Cook Rd * 8725-8745 W Higgins Rd 63 Blocks of Space

South Barrington Schaumburg Rolling Meadows Deer Park Bannockburn Westmont Elk Grove Village Naperville Warrenville Lincolnshire Schaumburg Lincolnshire Lisle Hoffman Estates Hoffman Estates Chicago Rosemont Rosemont Rolling Meadows Downers Grove Elgin Elgin Lincolnshire Lincolnshire Chicago Itasca Hoffman Estates Long Grove Libertyville Oakbrook Terrace Lisle Downers Grove Hoffman Estates Lincolnshire Northbrook Rosemont Lincolnshire Naperville Long Grove Itasca Northbrook Lisle Long Grove Itasca Lincolnshire Deerfield Lake Forest Downers Grove Downers Grove Itasca Oakbrook Terrace Oak Brook Rosemont Bannockburn Oakbrook Terrace Geneva Schaumburg Niles Glenview Naperville Evanston Deerfield Chicago

Size (sf)

Submarket

504,000 300,686 281,651 277,200 257,190 256,767 176,844 168,000 167,216 160,000 155,559 148,686 141,567 129,000 127,941 120,315 115,673 113,868 112,414 111,493 109,706 109,076 104,580 103,742 97,801 97,517 84,617 84,261 78,000 77,823 77,139 76,691 76,576 74,728 72,565 72,149 70,962 67,731 67,378 67,307 66,000 65,407 64,730 64,603 64,491 63,298 62,481 61,789 61,758 60,904 57,730 57,411 56,554 56,543 56,420 55,584 54,496 54,000 53,671 52,073 52,045 52,000 50,214 6,840,621

Northwest Northwest Northwest Northwest North East-West Northwest East-West East-West North Northwest North East-West Northwest Northwest O'Hare O'Hare O'Hare Northwest East-West Northwest Northwest North North O'Hare Northwest Northwest North North East-West East-West East-West Northwest North North O'Hare North East-West North Northwest North East-West North Northwest North North North East-West East-West Northwest East-West East-West O'Hare North East-West East-West Northwest North North East-West North North O'Hare

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

S U P P LY

• At 1600 McConnor Parkway in Schaumburg, Ameriquest Mortgage Company’s space is being marketed directly by the landlord as well as being marketed for sublease through August 2011 by Ameriquest.

CLASS A Building Address

SUBURBAN CHICAGO

LARGE BLOCKS OF DIRECT AVAILABILITY

Vacancy jumps 0.4 percent over the quarter

• After decelerating for several quarters, negativity resumed with a 0.4 percent increase in the direct vacancy rate, which now stands at 23.1 percent. The total vacancy rate remained unchanged from last quarter due to the decrease in sublease availability. Vacancy increased in all submarkets.

SUBURBAN CHICAGO

VACANCY RATES

• The largest change in vacancy occurred in the East-West Class A segment of the market. SIRVA’s space at 700 Oakmont Lane, which was formerly on the sublease market, became directly available adding 257,000 square feet of vacant space to the market. • The past trend of flight to quality was not apparent as the direct vacancy rate climbed across all classes. Class B space fared the worst with a 0.7 percent increase in the direct vacancy rate. • OUTLOOK: Pervasive weakness continues in Suburban Chicago. Companies, such as University HealthSystem Consortium, are gradually shifting their preference to the CBD, and organic growth cannot compensate. DEMAND

HISTORIC YEAR-END VACANCY RATES BY SUBMARKET: NORTH OUTPERFORMS

HISTORIC YEAR-END VACANCY RATES BY CLASS: B AND C PROPERTIES MORE THAN 1/4 VACANT

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Large transactions do not generate much new occupancy for the market

• Leasing activity for spaces larger than 20,000 square feet fell slightly compared to the fourth quarter of 2010 but is elevated compared to historical lows. Suburban Chicago failed to attract tenants from other locations during the quarter. All new deals represent relocations from elsewhere in the suburbs.

SUBURBAN CHICAGO

LARGE DEALS

• Among the renewal transactions, both Astellas Pharma US and BioSante Pharmaceuticals expanded indicative of the long-term strength of the pharmaceutical industry in the North submarket. • While two tenants expanded upon renewal, Fifth Third Bank reduced its occupancy by almost half when it renewed at 1701 Golf Road in Rolling Meadows.

• OUTLOOK: Increased leasing activity is expected as tenants are forced to make decisions, making the quarter a short pause before velocity accelerates. Expect more companies to contract when they sign new leases.

DEMAND

• The East-West submarket was the most active for new, large transactions as it was home to six large deals. Armour-Eckrich Meats is moving from sublease space, increasing its square footage by more than 20,000 square feet at 4225 Naperville Road in Lisle. Conversely, Principal Life Insurance and T-Systems North America are both reducing their occupancy in the submarket.

LARGE LEASE TRANSACTIONS: A MAJORITY OF DEALS WILL NOT INCREASE OCCUPANCY NEW Tenant

Type

Submarket

Building Address

Armour-Eckrich Meats RSA Medical A.M. Castle & Co. Principal Life Insurance Gemstone Omron Healthcare T-Systems North America Total - 7 Deals

New Relo New Relo New Relo Relo

East-West East-West East-West East-West Northwest North East-West

4225 Naperville Rd, Lisle 2135 CityGate Ln, Naperville 1420 Kensington Rd, Oak Brook 3025 Highland Parkway, Downers Grove 3850 N Wilke Rd, Arlington Heights 1925 W Field Ct, Lake Forest 1901 W Butterfield Rd, Downers Grove

Submarket

Building Address

O'Hare North North East-West O'Hare O'Hare North

1701 Golf Rd, Rolling Meadows 2000 Millbrook Dr, Lincolnshire 8045 Lamon Ave, Skokie 1700 Finley Dr, Lombard 8770 W Bryn Mawr Ave, Chicago 9600 W Bryn Mawr Ave, Rosemont 111 Barclay Blvd, Lincolnshire

Size (sf) 71,479 50,652 39,361 27,284 25,074 23,404 22,000 259,254

RENEWAL/EXPANSION/SUBLEASE Tenant Fifth Third Bank Zenith Electronics Corporation Astellas Pharma US Cinch Connectors Rexam Beverage Can Company TransNational BioSante Pharmaceuticals Total - 7 Deals

Abbreviations: Cont - Contraction

Exp - Expansion

Ren/Cont Ren Ren/Exp Ren Ren Sub Ren/Exp

Relo - Relocation

Size (sf) 52,801 50,000 46,493 35,067 31,654 27,976 20,105 264,096

Ren - Renewal

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Negative across the board; how much more to go?

• Negative absorption occurred in all four submarkets during the first quarter of 2011. After mounting a rebound during the last two quarters, the Northwest submarket had the weakest performance and accounted for half of the negative absorption in the market. The North submarket, home of many strong pharmaceutical companies, fared the best with only 31,000 square feet of negative absorption.

SUBURBAN CHICAGO

ABSORPTION

• OUTLOOK: The loss in occupancy is almost on par with the loss in employment; therefore tenants in the market may not need to shed additional space. Yet, without demand drivers, the loss in occupancy may surpass headcounts.

SUBURBAN CHICAGO ABSORPTION BY CLASS: NEGATIVE ACROSS CLASSES

DEMAND

EAST-WEST

2003

2004

2005

2006

2007

2008

2009

2010

YTD 2011

Class A

(1,044,708)

1,080,332

102,299

366,688

542,281

(259,973)

(520,909)

(219,164)

(43,817)

Class B

(499,928)

(25,541)

389,014

484,869

(203,072)

(2,062)

(461,943)

67,827

(65,434)

Class C

(49,662)

76,936

85,269

(125,850)

(108,813)

(87,441)

(217,479)

7,017

(1,999)

(1,594,298)

1,131,727

576,582

725,707

230,396

(349,476)

(1,200,330)

(144,319)

(111,250)

Total

NORTH

2003

2004

2005

2006

2007

2008

2009

2010

YTD 2011

Class A

(617,229)

(10,452)

196,403

(100,049)

615,115

(240,617)

(486,877)

(312,238)

(25,474)

Class B

(51,905)

62,026

164,357

316,207

355,510

(60,982)

(585,395)

(319,078)

(17,378)

Class C

(45,023)

(39,173)

12,697

(39,440)

26,935

(2,048)

(276,642)

(40,044)

11,468

(714,157)

12,401

373,457

176,718

997,560

(303,647)

(1,348,914)

(671,360)

(31,385)

2003

2004

2005

2006

2007

2008

2009

2010

YTD 2011

Class A

(280,998)

902,901

225,865

(488,651)

10,333

(302,930)

(213,601)

(21,262)

(112,921)

Class B

(397,531)

233,613

(234,681)

12,266

(164,112)

(261,498)

(680,058)

(295,928)

(138,315)

Total

NORTHWEST

Class C Total

O'HARE

22,431

(13,282)

(216,898)

(15,371)

(51,429)

(28,362)

(32,482)

(192,091)

(30,636)

(656,098)

1,123,232

(225,714)

(491,756)

(205,208)

(592,790)

(926,140)

(509,280)

(281,872)

2003

2004

2005

2006

2007

2008

2009

2010

YTD 2011

Class A

(159,845)

402,561

(55,786)

189,235

11,636

(256,325)

46,459

209,180

2,752

Class B

9,761

(306,424)

53,945

7,915

(81,167)

(51,601)

(291,145)

70,376

(43,244)

Class C

(39,147)

(15,002)

(204,597)

90,170

(50,022)

(35,696)

(345,476)

(10,855)

(20,962)

(189,231)

81,135

(206,438)

287,320

(119,553)

(343,622)

(590,162)

268,701

(61,454)

2003

2004

2005

2006

2007

2008

2009

2010

YTD 2011

Class A

(2,102,780)

2,375,342

468,781

(32,777)

1,179,365

(1,059,845)

(1,174,928)

(343,484)

(179,460)

Class B

(939,603)

(36,326)

372,635

821,257

(92,841)

(376,143)

(2,018,540)

(476,802)

(264,371)

Class C

(111,401)

9,479

(323,529)

(90,491)

(183,329)

(153,547)

(872,078)

(235,972)

(42,129)

(3,153,784)

2,348,495

517,887

697,989

903,195

(1,589,535)

(4,065,547)

(1,056,259)

(485,960)

Total

TOTALS

Total

*Numbers in parentheses are negative

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

O’Hare posts gains while the other submarkets continue to cut asking rents

• Over the last year, gross asking rents have fallen in most submarkets and classes as landlords reduce rates to attract tenants. Class A asking rents have been relatively flat overall. • The O'Hare submarket mounted a strong performance compared to its peers with a 3.9 percent increase in gross asking rents over the last year. This performance was driven by large increases in the Class B and C segments as they rebound from recessionary lows. On the other hand, Class A rents fell slightly in O’Hare.

SUBURBAN CHICAGO

GROSS ASKING RENTS

• Compared to peak levels, Class C gross asking rents in the Northwest and O'Hare submarkets have declined nearly 30 percent--a much larger margin than any other segment.

AVERAGE GROSS ASKING RATES BY CLASS AND SUBMARKET Average Direct Gross Asking Rent East-West North Northwest O'Hare Suburban Chicago Total

A $21.66 $21.90 $22.75 $22.87 $22.19

Change over last year -0.1% 0.4% -2.6% -0.4%

-0.7%

B $19.26 $19.67 $17.29 $20.70 $18.98

Change over last year -3.0% -0.8% -3.0% 9.3%

-1.1%

C $15.74 $16.57 $13.63 $15.50 $15.45

Change over last year -3.5% -3.0% -16.7% 11.9%

-3.3%

Total

Change over last year

$20.06 $20.79 $20.30 $20.96 $20.42

-1.4% -0.1% -3.7% 3.9% -1.0%

F E AT U R E S

• OUTLOOK: Asking rents, coupled with concession packages, will need to become even more aggressive to jumpstart a recovery in the office market before hiring warrants it. However, with asking rents at their lowest point in MB Real Estate’s tracked history, landlords may not have any room left to further reduce rents.

ASKING RATES ARE FLATTENING ACROSS CLASSES

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Distressed sales dominate investment activity

• Property trades in Suburban Chicago were characterized by distress with five of the seven largest buildings associated with foreclosures. Although a price was identified, 9700 West Higgins Road and 1834 Walden Office Square were also foreclosures. • Duke Realty has become an active seller in the Chicago market. Two buildings in Lake Forest that were previously under contract closed during the quarter for $147 and $177 per square foot respectively. The company is currently listing two additional properties in the EastWest submarket.

SUBURBAN CHICAGO

INVESTMENT SALES

• OUTLOOK: While active, Suburban Chicago has not generated the premier investor interest that characterizes the CBD due to its lack of dynamic demand drivers.

INVESTMENT SALES: INDICATIVE OF DISTRESS

Building Address

Submarket

Size (sf)

Price per sf * Class Seller

Price

Buyer

425 N Martingale Rd (2 Properties), Schaumburg

Northwest

711,532

Foreclosure

Woodfield Holdings Pt, LLC

New York Life Insurance Co.

8550 W Bryn Mawr Ave, Chicago

O'Hare

302,088

Foreclsoure

GlenStar Properties LLC

Wells Fargo Bank

9700 W Higgins Rd, Rosemont

O'Hare

276,578

$21,000,000

$76

AEW Capital Management, L.P.

Western National Life Insurance Company

3010 Highland Pky, Downers Grove

East-West

275,000

$65,000,000* $236

Wells REIT II & Lincoln Property Company

Wells REIT II

3005 Highland Pky, Downers Grove

East-West

251,235

Opus Development Corporation

Cornerstone RE Advisors

Northwest

227,760

$10,400,000

$46

Schaumburg-Algonquin Associates, LLC

Wells Fargo & Co

Northwest

167,540

Deed in Lieu of Foreclosure

Romanek Properties, Ltd.

Nomura Credit & Capital, Inc.

150 S Saunders Rd, Lake Forest

North

160,000

Opus Corp.

Fred Eychaner

1930 Thoreau Dr N (2 Properties), Schaumburg

Northwest

109,392

$30

Ardmin Properties Management Ardmin Properties Management Group, Inc. Group, Inc.

100 Field Dr, Lake Forest

North

105,000

$15,400,000 $147

Duke Realty

CB Richard Ellis Realty Trust

1925 W Field Ct, Lake Forest

North

99,538

$17,600,000 $177

Duke Realty

CB Richard Ellis Realty Trust

5105 Tollview Dr, Rolling Meadows

Northwest

49,978

$1,280,000

$26

George J Cibula

Marc Realty

2601 Patriot Blvd, Glenview

North

49,000

$8,500,000 $173

Glenview-2700 Patriot Blvd LLC Catellus Development

4580 Weaver Pky, Warrenville

East-West

48,000

$2,225,000

$46

D.A. Stuart Company

DynaCom Management

800 S Milwaukee Ave, Libertyville

North

36,642

$2,640,500

$72

Cambridge Homes

Frontier Real Estate Investment Company, LLC

1834 Walden Office Sq (3 Properties), Schaumburg 935 National Pky (3 Properties), Schaumburg

$36,000,000 $225 $3,300,000

F E AT U R E S

Investment Sales: 1st Quarter 2011

On the Market: 1st Quarter 2011 Price per sf * Class Seller

Building Address

Submarket

Size (sf)

Price

231 N Martingale Rd, Schaumburg

Northwest

317,198

$61,000,000

4343 Commerce Ct, Lisle

East-West

167,756

3805 E Main St (2 Properties), St. Charles

East-West

55,408

1-S660 Midwest Rd, Oakbrook Terrace

East-West

50,043

$192

Keystone Property Group

Prime Group Realty Trust

$6,500,000

$117

Duke Realty Corp.

$8,900,000

$178

Duke Realty Corp.

Status (Buyer or Listing Agent) New on Market (CB Richard Ellis) New on Market (Holliday Fowler Fenoglio) New on Market (Coldwell Banker Commercial) New on Market (Coldwell Banker Commercial)

* Price of 3010 Highland Pky indicates 100% valuation. Wells REIT II bought out Lincoln Property’s minority interest. Price per sf (square foot) - based off estimated selling price for new to market buildings

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

Losses are expected to continue, but the market is beginning to line up with the economy

Losses in occupancy continued in Suburban Chicago, proving that the muted fourth quarter of 2010 was not a turning point for the market. Due to the high employment loss, a close correlation between occupancy and total employment in previous recessions, and an increasing trend of relocating to the CBD, MB Real Estate still expects increasing vacancy in coming quarters.

MB Real Estate expects occupancy declines to continue until 2012. The large losses from 2009 are not expected again, but tenants still need to shave off excess space when their leases expire. Starting in 2013, absent a new demand driver, positive absorption will occur but will be deliberate, representing slow growth within companies.

Total Historic and Forecasted Inventory (sf)

Total Historic & Forecasted Occupancy (sf)

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

90,601,193 91,989,948 95,078,215 98,744,696 103,270,399 108,254,000 109,769,838 110,090,266 110,423,452 111,030,084 110,806,221 111,175,875 112,080,944 112,218,212 112,374,614 112,324,827 112,324,827

82,039,636 85,388,879 88,016,285 90,321,332 93,033,912 92,247,968 91,258,173 88,104,389 90,452,884 90,970,771 91,668,760 92,571,955 90,982,420 87,973,132 86,916,873 85,844,450 85,129,501

1997-2010 Absorption Avg:

478,543

YTD 2011 Absorption:

(485,960)

Direct Vacancy % 9.4% 7.2% 7.4% 8.5% 9.9% 14.8% 16.9% 20.0% 18.1% 18.1% 17.3% 16.7% 18.8% 21.6% 22.7% 23.6% 24.2%

F E AT U R E S

Since occupancy peaked in 2007, it has fallen 6.6 percent in Suburban Chicago. Typically, total occupancy declines mirror peak-to-trough employment losses on a percentage basis in this market. Total employment declined 7.5 percent in the Chicago MSA peak-to-trough; therefore, the office market has room for further losses. Suburban Chicago has few mitigating factors that would change the forecast. Companies such as United Airlines are exiting Suburban Chicago to better accommodate a younger demographic, leaving behind formerly owneroccupied buildings that may enter the competitive tenant market

Year

SUBURBAN CHICAGO

FORECAST

Total projected inventory based on addition of projects currently under construction Occupancy is forecast based on proprietary assumptions regarding the Chicago MSAâ&#x20AC;&#x2122;s total employment change and the office industryâ&#x20AC;&#x2122;s historical performance which trails the overall economy.

HISTORIC & PROJECTED VACANCY: OVERALL VACANCY RATE WILL PEAK NEAR 24%

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

SUBURBAN CHICAGO

SUBMARKET MAP

F E AT U R E S FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

EAST-WEST

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Vacancy + Sublease) %

Class A

20,624,276

(43,817)

4,363,219

21.2%

16,261,057

751,706

24.8%

Class B

14,533,430

(65,434)

3,420,850

23.5%

11,112,580

568,629

27.5%

Class C

4,916,969

(1,999)

1,168,363

23.8%

3,748,606

5,924

23.9%

Total

40,074,674

(111,250)

8,952,431

22.3%

31,122,243

1,326,259

25.6%

NORTH

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Vacancy + Sublease) % 24.9%

16,871,546

(25,474)

3,216,604

19.1%

13,654,942

984,544

7,443,059

(17,378)

1,565,591

21.0%

5,877,468

83,969

22.2%

Class C

2,586,800

11,468

514,815

19.9%

2,071,985

16,931

20.6%

Total

26,901,404

(31,385)

5,297,010

19.7%

21,604,394

1,085,444

23.7%

NORTHWEST

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Vacancy + Sublease) % 23.7%

Class A

18,527,474

(112,921)

3,818,312

20.6%

14,709,162

579,052

Class B

9,799,410

(138,315)

3,232,733

33.0%

6,566,677

188,771

34.9%

Class C

2,297,670

(30,636)

687,662

29.9%

1,610,008

33,330

31.4%

Total

30,624,553

(281,872)

7,738,707

25.3%

22,885,846

801,153

27.9%

O'HARE

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Vacancy + Sublease) %

Class A

7,823,143

2,752

1,599,746

20.4%

6,223,397

149,025

22.4%

Class B

4,350,742

(43,244)

1,385,525

31.8%

2,965,217

213,792

36.8%

Class C

2,550,312

(20,962)

920,497

36.1%

1,629,815

6,143

36.3%

Total

14,724,197

(61,454)

3,905,768

26.5%

10,818,429

368,960

29.0%

TOTALS

RBA (sf)

YTD Absorption (sf)

1st Quarter Absorption (sf)

Direct Vacancy (sf)

Direct Vacancy %

Occupancy (sf)

Sublease Vacancy (sf)

Total Vacancy Rate (Vacancy + Sublease) %

Class A

63,846,437

(179,460)

12,997,881

20.4%

50,848,557

2,464,327

24.2%

Class B

36,126,640

(264,371)

9,604,697

26.6%

26,521,942

1,055,161

29.5%

Class C

12,351,750

(42,129)

3,291,337

26.6%

9,060,414

62,328

27.2%

Total Suburban

112,324,827

(485,960)

25,893,915

23.1%

86,430,913

3,581,816

26.2%

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

F E AT U R E S

Class A Class B

SUBURBAN CHICAGO

MARKET STATISTICS

ADDITIONAL INFORMATION GLOSSARY Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space.

Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis.

Asking Rent: The published rental rate for a space in a building, which may vary from the rent which is negotiated upon by the tenant and landlord.

Sales Price: The total dollar amount paid for a particular property at a particular point in time.

Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA.

SF: Abbreviation for Square Feet.

Class: A classification used to describe buildings, with Class A reflecting the highest quality and Class C reflecting the lowest quality. Direct Vacant Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased.

CHICAGO MARKET OVERVIEW

SECTION FOUR

Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within

Initial Rate: The contracted starting rental rate for the first term of a lease. Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. Calculated by adding the Rentable Building Area (RBA) of all properties in a market or submarket. Large Block: The amount of contiguous space available in a building in terms of square footage. Contiguous spaces over 50,000 square feet are considered large by MB Real Estate. Lease Comparable: Comparables are properties with characteristics that are similar in nature. Their signing lease rates and other contracted elements are aggregated to analyze contracted market conditions as opposed to asking market conditions. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building type specific, and are nonoverlapping contiguous geographic designations. Markets can be further subdivided into Submarkets. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Rentable Building Area (RBA): The total building square footage that can be occupied by, or assigned to a tenant for the purpose of determining a tenantâ&#x20AC;&#x2122;s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets.

Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. Tenant Improvement: Those changes to property to accommodate specific needs of a tenant. TIs include installation or relocation of interior walls or partitions, carpeting or other floor covering, shelves, windows, toilets, etc. The cost of these is negotiated in the lease. Total Vacant Space: Direct plus sublease vacant space. Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A buildings considered to be under construction after it has begun construction and until it receives a certificate of occupancy. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Can be based on direct, sublease, or total vacant space. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied.

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW

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M B R E A L E S TAT E

ABOUT MB REAL ESTATE

At MB Real Estate, our corporate mission is to maximize the value of our clientsâ&#x20AC;&#x2122; real estate by creating timely and innovative solutions that meet their unique needs and objectives. We offer the highest level of real estate support with our team of committed, resultsdriven experts in asset and facilities management, leasing, tenant representation, development, project management, and investment services. Supported by dedicated accounting, marketing, human resources, and information technology teams, our unique full-service firm is an industry leader in local and national corporate real estate.

MB REAL ESTATE HEADQUARTERS

DEPARTMENT LEADERSHIP

181 West Madison, Suite 4700 Chicago, Illinois 60602 phone: 312.726.1700 fax: 312.807.3853

MARK A. BUTH

EAST COAST REGIONAL HEADQUARTERS

GARY A. DENENBERG

335 Madison Avenue, 14th Floor New York, New York 10017 phone: 212.350.2300 fax: 212.350.2301

Senior Vice President & Managing Director of Leasing Services

ANDREW J. DAVIDSON Executive Vice President & Managing Director of Corporate Services & Tenant Advisory

Executive Vice President & Managing Director of Leasing Services

DAVID R. GRAFF Senior Vice President of Project Services

MAUREEN G. GROVE Vice President & Managing Director of Accounting Services

COMPANY LEADERSHIP PETER E. RICKER Chairman & CEO

JOHN T. MURPHY

DANIEL J. NIKITAS Executive Vice President of Corporate Services & Tenant Advisory Services

KEVIN M. PURCELL Executive Vice President & Managing Director of Asset Management

President

EVE WEST Chief Administrative Officer & Managing Director, Support Services

FIRST QUARTER 2011 | CHICAGO MARKET OVERVIEW