MARKETBE EAT

OF FFICE SNAPSH S HOT

RIC CHMOND D, VA
A Cu ushman & Wak kefield Researc ch Publication

Q3 2013
OUTL LOOK
With l ess large-block space available, brokers say they y arent seeing the big g deals, but unless a company w wants a signature opportunity, there iis enough space to accommodat te. They believe the area is still some d distance from ne ew construction n. But ten nants looking fo or 2,000 to 5,000 0 sf might find th hemselves outbid d for the e best buildings. As availability sh hrinks, tenants a are wise to conden nse the decision n-making process. STAT TS ON THE G O
Q3 2012 2 Overa all Vacancy Direct t Asking Rents (ps f/yr) YTD L Leasing Activity (sf f) 10.2% % $16.72 2 1,176,647 7 Q3 2013 9.6% $16.85 1,586,835 Y-O-Y CHANGE -0.6pp 0.8% 34.9% 12 MONTH H FORECAST T

ECONOMIC OVERVIEW
As the U.S. eco onomy sputters along, Virginia has reclaimed it ts top spot on Forbes F magazines annual list of Be est States for Bu usiness. Virginia had ranked second in the past three years, but t returned to hea ad the list for th he first time since 2009. The states dive erse economy, st trong workforce e and probusine ess regulatory framework prope elled it to the No o. 1 spot.

MAJO OR TRANSACTIONS
Deep Run 3 continues s to enjoy mome entum in the ma arketplace and attract t small and large e tenants by prov viding amenities not historically offered. Already this year, y 150,000 square feet (sf) ha ave been leased at 995 54 Mayland Drive e. Acision took 16,472 sf this qu uarter, and Appen ndix R Solutions leased 14,729 sf. s Brokers say th he Innsbook marke et is enjoying com mpetition for the first time. C&F F Bank leased 5,200 sf in the North Park building at 4701 Cox Road d, which will serve as the West Point-based banks s home base for the metro region n and as the head dquarters for its s commercial banking division. CareP Point Medical lea ased an additiona al 4,603 sf in its current space and no ow occupies a to otal of 25,771 sf f in Highwoods II at 4860 Cox Road. Down ntown, Sands An nderson is expan nding its office in n the Bank of Ameri ica Center to ac ccommodate its growing legal fir rm. It expanded by an additional 5,800 0 sf to give it a to otal of almost 39 9,000 sf. Sands Ander rson is the latest t law firm to rein nforce its comm mitment this year r to being downtown: Construction C has s begun on McG GuireWoodss new G Gateway Plaza to ower at Eighth and Cary Streets, Hunton & William ms struck a deal to stay at River rfront Plaza and Troutman Sanders renewed its lease in Riverside e on the James. eutical company, leased 10,328 sf in the Intelliject, a pharmace downt town Turning Ba asin Building at 111 Virginia St. Sales a activity downtow wn was brisk. Th he 310,000-sf Me eadWestvaco headquarters building sold for $143.6 million to Selec ct Income REIT, a Massachusetts-based real r estate inves stment firm. Rich hmond-based NewM Market Corp. wa as the seller. Duesenberg Properties acquired the Ex xchange Place Office O Building at 1313 E. Main St. from Exchange e Place Limited Partners ship for $3.9 million. The 78,800 0-sf building will be con nverted into a mixed-use m asset with w commercia al and office spac ce and 63 3 apartments. Th he former Amer rican Red Cross building, 23,000 0 sf at 4 409 E. Main St., was w sold to Prog gress Dodson for $1.02 million. The se eller was Hamne er Enterprises.

DIRE ECT RENTAL V VS. VACANCY Y RATES

$ $17.20 $ $17.00 psf/yr $ $16.80 $ $16.60 $ $16.40 $ $16.20 2009 2010 2011 2012 Q3 3 2013 10.5% 10.0% 9.5% 9.0% 8.5% 8.0%

DIRECT GROS SS RENTAL RATE

DIRECT VACANCY V RATE

OVER RALL ACTIVIT TY VS. ABSOR RPTION

sf (thousands) 3 3,000.0 1,700 1,837 2,544 1,558 543 496 399 462 1 1 1,000.0 0.0 -1 1,000.0 -2 2,000.0 1,587 2 2,000.0

9 2009

-1 313 -1,313

2010

2011

2012
ABSORPTION

2013 YTD

LEASIN G ACTIVITY

Thalhim mer 11100 W W. Broad St. Glen Allen, VA 23060 ushmanwakefield.c com/knowledge www.cu

For more information, conta act: B Service s Brad McGetrick, Director, Brokerage 804 697 35 558 brad.mcge etrick@thalhimer.c com

The market terms an nd definitions in this report a are based on NAIOP standards. No warranty or represen ntation, express or implied, is made to the accuracy or co ompleteness of the information co ontained herein, and same is submitted subject to errors, , omissions, change of price, renta al or other conditions, withd drawal without notice, and to o any special listing conditions imp posed by our principals. 2013 Cushman & W Wakefield, Inc. All rights rese erved.

RICHMOND, VA
SUBMARKET INVENTORY OVERALL VACANCY RATE 13.3% 2.7% 5.0% 7.8% 5.3% 11.8% 19.8% 9.5% 10.1% 12.6% 13.7% 14.2% 7.1% 7.6% 4.1% 3.8% 14.4% 20.7% 7.3% 3.5% 9.4% 0.0% 7.6% 9.6% DIRECT VACANCY RATE 11.4% 2.7% 5.0% 6.8% 5.3% 10.9% 19.8% 9.4% 10.1% 12.6% 13.6% 14.2% 7.1% 7.6% 4.1% 3.8% 14.4% 20.7% 6.8% 3.5% 4.9% 0.0% 7.6% 9.0% YTD LEASING ACTIVITY 307,717 47,000 19,263 192,672 24,182 99,211 6,361 482,790 15,795 4,765 16,658 149,206 10,196 46,997 3,994 0 7,460 36,275 27,442 2,347 31,787 1,800 52,917 1,586,835 UNDER CONSTRUCTION 307,000 0 0 0 0 0 0 0 0 0 0 0 0 0 200,600 0 0 0 0 0 0 0 0 507,600 YTD CONSTRUCTION COMPLETIONS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 YTD DIRECT NET ABSORPTION 62,041 32,636 (241) 4,570 (4,331) 2,587 (913) 470,865 18,093 (1,111) (35,901) 13,837 (6,629) 33,498 (7,304) 500 897 (28,994) 6,042 (33,679) (2,324) 0 (5,856) 518,283 YTD OVERALL NET ABSORPTION 8,307 32,636 (241) (1,060) (4,331) 2,587 (913) 470,515 18,093 (1,111) (35,751) 43,727 (6,629) 33,498 (7,304) 500 897 (28,994) 2,297 (33,679) (24,784) 0 (5,856) 462,404 OVERALL WTD. AVG ALL CLASSES GROSS RENTAL RATE* $19.48 $15.92 $15.96 $17.81 $12.14 $13.35 $13.64 $17.83 $13.98 $12.03 $15.53 $16.14 $15.04 $13.04 $16.29 $8.45 $14.05 $13.37 $16.29 $18.12 $15.19 $18.23 $14.11 $16.80 DIRECT WTD. AVG. CLASS A GROSS RENTAL RATE* $25.29 N/A $22.00 $19.71 N/A N/A N/A $18.82 $17.17 N/A N/A $17.74 N/A N/A N/A N/A N/A N/A $18.86 $20.50 $17.98 N/A $20.34 $20.79

CBD East End Far West End Glenside/Broad St Hull Street Corridor I-95 N/Ashland I-95 N/Chamberlayne Innsbrook Iron Bridge Corridor Lakeside Mechanicsville Midlothian Corridor Monroe Ward Near West End North Broad Northside Parham East Parham South Rt 288 Corridor Shockoe Bottom Stony Point/Huguenot West Creek West End TOTALS

10,863,941 659,616 803,255 4,737,726 2,779,098 685,983 354,530 8,148,820 1,994,671 334,259 1,257,224 4,378,447 2,574,234 2,167,687 3,022,471 292,513 2,822,117 1,018,984 1,563,111 1,541,169 1,497,674 1,740,213 3,843,810 59,081,553

* RENTAL RATES REFLECT ASKING $PSF/YEAR

MARKET HIGHLIGHTS
SIGNIFICANT Q3 2013 LEASE TRANSACTIONS 9275 Chamberlayne Avenue Deep Run 3 Deep Run 3 4480 Cox Road Turning Basin Building SIGNIFICANT Q3 2013 SALE TRANSACTIONS 501 S. 5th Street 1313 E. Main Street 409 E. Main Street SIGNIFICANT Q3 2013 CONSTRUCTION COMPLETIONS NA SIGNIFICANT PROJECTS UNDER CONSTRUCTION Gateway Plaza Biotech 8 Phase 2 Biotech 8 Phase 3 SUBMARKET I-95 N/Chamberlayne Innsbrook Innsbrook Innsbrook CBD SUBMARKET CBD CBD CBD SUBMARKET TENANT HCA Health Services of VA, Inc. Acision, LLC Appendix R Solutions Paredes Institute for Womens Imaging, PC Intelliject BUYER Select Income REIT Duesenberg Properties, LLC Progress Dodson MAJOR TENANT BUILDING CLASS A A A A A PURCHASE PRICE / $PSF $143,600,000 / $463 $3,900,000 / $50 $1,020,000 / $44 COMPLETION DATE SQUARE FEET 22,000 16,472 14,729 14,513 10,328 SQUARE FEET 310,000 78,800 23,000 BUILDING SQUARE FEET

SUBMARKET CBD North Broad North Broad

MAJOR TENANT McGuireWoods LLP NA NA

COMPLETION DATE Q1 2015 Q1 2014 Q2 2014

BUILDING SQUARE FEET 307,000 112,000 88,600

Thalhimer 11100 W. Broad St. Glen Allen, VA 23060 www.cushmanwakefield.com/knowledge

For more information, contact: Brad McGetrick, Director, Brokerage Services 804 697 3558 brad.mcgetrick@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. 2013 Cushman & Wakefield, Inc. All rights reserved.