MARKETBEAT

OFFICE SNAPSHOT
CHARLOTTE, NC
A Cushman & Wakefield Alliance Research Publication

Q3 2012

ECONOMIC OVERVIEW
Charlotte was thrust into the national spotlight recently, playing host to the Democratic National Convention in the Central Business District (CBD). The city and region have since been buzzing with excitement given the positive feedback that was received from delegates, the media, and other convention attendees. Several large corporate relocation candidates are now rumored to be interested in the region. The unemployment rate, however, has stubbornly hovered at 10.0%, in spite of continued positive sentiment and above-average consumer spending indicators. The private sectors ability to add jobs remains the key economic indicator with regards to improving market conditions. As noted during the second quarter, concession packages offered by landlords have continued to stabilize, even though tenants are still seeking aggressive tenant improvement dollars and free rent. Tenant activity remains steady, with CBD, Southpark, and Highway 51 submarkets leading the way. The CBDs lack of high rise space has now become a concern, particularly with no new construction slated to begin in the near future. Finally, though the third quarter has typically been sluggish in the past, the most recent three months saw a long-term commitment from Wells Fargo who expanded by 80,000 square feet (sf) at Innovation Park in the University submarket. CAPITAL MARKETS Capital Markets activity held steady during Q3 2012 with the acquisition of two class A suburban office assets, Toringdon VI & VIII, during July for approximately $123 per square foot (psf). The CBD also saw a few setbacks during Q3 2012 with One Wells Fargo Center falling out of contract and BB&T Center being pulled from the market reportedly due to significant pricing disconnect. On the positive side, we anticipate continued investment activity as LakePointe, Vanguard Centre, ArrowPoint Office Park, and Parkways six-building suburban office portfolio are all being actively marketed and appear to be attracting genuine investor interest. Charlotte continues to draw the attention of well-capitalized investors globally. As office investment activity continues to rebound in gateway markets like New York, Chicago, and Los Angeles, investors are seeking increased yield opportunity in strong secondary markets like Charlotte.

OUTLOOK
The political landscape and economic climate have many companies waiting on the sidelines to see how the next few months will unfold before making long term decisions. Tenants will continue to attempt to capitalize on competitive lease rates and extended terms, but will find increasing difficulty in the tighter submarkets.

STATS ON THE GO
Q3 2011 Overall Vacancy Direct Asking Rents (psf/yr) YTD Leasing Activity (sf) 13.1% $18.26 2,416,082 Q3 2012 12.0% $18.94 2,804,406 Y-O-Y 12 MONTH CHANGE FORECAST -1.1pp 3.7% 16.1%

DIRECT RENTAL VS. VACANCY RATES

$21.00 $20.00 psf/yr $19.00 $18.00 $17.00 $16.00 2008 2009 2010 2011 Q3 12 16.0% 14.0% 12.0% 10.0% 8.0% 6.0%

DIRECT GROSS RENTAL RATE

DIRECT VACANCY RATE

LEASING ACTIVITY VS. OVERALL NET ABSORPTION

5.0 4.0 msf 3.0 2.0
3.4 4.2 0.1 4.4 1.4 4.5 1.5 2.8

0.0 2008 2009 2010 2011 2012 YTD

LEASING ACTIVITY

OVERALL NET ABSORPTIONS

Thalhimer 1111 Metropolitan Ave. Charlotte, NC 28204 www.cushmanwakefield.com/knowledge

For more information, contact: Katie Kidd 704 705 3850 katie.kidd@thalhimer.com

0.5

1.0

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.

CHARLOTTE, NC
SUBMARKET INVENTORY OVERALL VACANCY RATE 18.2% 16.9% 5.5% 4.2% 13.2% 27.5% 8.6% 8.6% 5.3% 11.5% 16.0% 10.5% 7.8% 12.9% 13.2% 17.5% 7.4% 9.8% 8.2% 14.4% 4.3% 17.5% 8.3% 14.8% 4.4% 12.4% 15.6% 9.0% DIRECT VACANCY RATE 17.9% 16.9% 5.5% 4.2% 13.2% 27.5% 8.6% 8.3% 5.3% 7.6% 14.8% 10.5% 7.8% 12.5% 12.9% 5.8% 7.4% 9.1% 8.1% 13.6% 4.3% 17.3% 8.3% 14.4% 4.4% 12.4% 15.6% 8.8% 301,593 0 0 11,758 53,205 15,000 47,680 1,087,927 5,480 10,756 37,464 26,911 48,036 160,820 63,802 46,598 10,250 82,589 105,280 182,868 22,182 17,356 36,453 168,688 2,500 33,034 159,304 63,872 305,201 0 0 0 72,536 0 0 0 0 0 6,232 0 0 550,506 53,200 0 0 0 0 35,000 0 0 0 0 29,960 0 0 0 YTD LEASING ACTIVITY UNDER CONSTRUCTION YTD CONSTRUCTION COMPLETIONS 0 0 0 0 49,556 0 0 0 0 0 0 3,388 0 0 6,000 0 10,987 0 0 3,475 0 0 0 0 0 34,512 0 0 YTD DIRECT NET ABSORPTION YTD OVERALL NET ABSORPTION OVERALL WTD. AVG ALL CLASSES GROSS RENTAL RATE* 104,974 (9,989) (2,950) 12,366 229,545 3,340 13,617 (15,889) 7,397 1,901 (43,420) 27,224 73,139 48,616 13,453 (8,878) 9,415 (41,554) (17,504) 4,018 15,153 (28,962) 55,274 52,036 4,001 21,004 (27,248) (2,323) 117,780 (9,989 (2,950) 12,366 231,495 3,340 13,617 255,574 7,397 1,901 (43,420) 27,224 73,339 49,170 13,883 24,340 12,754 (32,215) (17,462) (310) 15,153 (28,962) 55,274 63,779 4,001 21,004 (22,946) 13,460 $15.76 $12.34 $6.14 $7.79 $25.97 $14.37 $12.26 $23.75 $12.11 $20.64 $15.41 $13.03 $12.66 $23.49 $16.41 $10.67 $12.06 $21.39 $18.64 $17.75 $12.25 $16.15 $12.18 $21.69 $13.90 $17.68 $19.55 $15.06 DIRECT WTD. AVG. CLASS A GROSS RENTAL RATE* $18.05 $0.00 $0.00 $0.00 $51.31 $23.71 $0.00 $24.97 $0.00 $24.06 $21.50 $19.55 $21.60 $24.94 $26.75 $20.35 $0.00 $24.77 $25.28 $19.78 $0.00 $0.00 $0.00 $25.02 $0.00 $26.28 $17.93 $23.00

Airport Alexander County Anson County Burke County Cabarrus County Caldwell County Catawba County CBD Cleveland County Cotswold Crown Point East Charlotte Gaston County Highway 51 Iredell County Lancaster County Lincoln County Midtown/Randolph Rd. Midtown South End North East/I-77 Northwest Charlotte Park Road Rowan County Southpark Stanley County Union County University York County

12,635,671 98,241 90,592 750,097 3,627,992 737,554 3,418,116 22,541,428 1,497,928 461,396 2,972,161 4,625,542 4,007,004 7,847,499 3,596,525 1,261,038 856,138 3,442,268 5,320,830 5,060,580 1,283,003 1,364,374 1,277,016 5,701,056 436,303 2,196,623 7,860,630 4,867,686

TOTALS

109,884,656 12.0%

11.6%

2,804,406

1,052,635

107,918

488,398

849,239

$18.73

$23.53

* RENTAL RATES REFLECT ASKING $PSF/YEAR

Thalhimer 1111 Metropolitan Ave., Suite 315 Charlotte, NC 28204 www.cushmanwakefield.com/knowledge

For more information, contact: Katie Kidd 704 705 3850 katie.kidd@thalhimer.com

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.

MARKET HIGHLIGHTS Significant Q3 2012 Lease Transactions

Live Oak Building Ally Center Johnston Building SUBMARKET Airport CBD CBD SUBMARKET Highway 51 Highway 51 TENANT Paychex Navigant Consulting Montreat College BUYER Stockbridge / Trinity Stockbridge / Trinity MAJOR TENANT BUILDING CLASS B A B PURCHASE PRICE / $PSF $12,250,000 / $128 $12,250,000 / $119 COMPLETION DATE SQUARE FEET 18,529 16,956 16,000 SQUARE FEET 95,806 102,755 BUILDING SQUARE FEET

Significant Q3 2012 Sale Transactions

Toringdon VI Toringdon VIII

Significant Q3 2012 Construction Completions SUBMARKET

N/A

Significant Projects Under Construction

Ballantyne Woodward Building Ballantyne Gragg Building Ballantyne SPX Building

SUBMARKET Highway 51 Highway 51 Highway 51

MAJOR TENANT Speculative Speculative SPX Headquarters

COMPLETION DATE Q4 2012 Q4 2012 Q4 2012

BUILDING SQUARE FEET 275,000 275,000 238,991

* RENEWAL - NOT INCLUDED IN LEASING ACTIVITY STATISTICS

Thalhimer 1111 Metropolitan Ave., Suite 315 Charlotte, NC 28204 www.cushmanwakefield.com/knowledge

For more information, contact: Katie Kidd 704 705 3850 katie.kidd@thalhimer.com

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.