AQUILA Austin Market Report - 2Q 2015

A U S T I NMARKETR E P O R T

2Q 2015

AQUILAKNOWSAUSTIN

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DISCLAIMER This report utilizes various

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information contained herein is confidential

and proprietary in nature. No warranties or

guarantees are made as to the accuracy of

the information contained herein.

Hartland Plaza; Photo by Scott Mason Photography

32Q 2015 Austin Market Report

Not only is Austin’s population growing at an amazing

rate, but so is its economy. These trends are reflected in

the abundant volume of new construction taking place in

The Capitol City. Accordingly, AQUILA’s Market Research

team turns its attention to development this quarter.

In addition to the Pipeline of Projects and submarket

analyses we always provide, included in this quarterly

report is AQUILA’s research showing the effects of new

office construction on rental rates in existing buildings

located in close proximity to new product.

July 2014 saw Austin's Central Business District's (CBD)

first office delivery of scale since Frost Tower’s completion

in 2004. As the national and local economies expanded

after the Great Recession, and in light of a dearth of

new supply, a demand surplus was established for CBD

office space. Colorado Tower and IBC Bank Plaza were

the first beneficiaries of this demand, as both buildings

were nearly 100% leased upon their completion. Shortly

thereafter, the Seaholm power plant redevelopment and

501 Congress experienced similar successes.

As has historically been the case in Austin, CBD trends

percolate into the Northwest (NW) and Southwest (SW)

submarkets. Over 1 million square feet of new office

product across seven projects broke ground in the

SW along with six projects consisting of over 700,000

square feet in NW Austin. Impressively, over 60% of this

new inventory, defined as projects that broke ground

between 1Q 2014 and 1Q 2015, was preleased. Since

1Q 2014, there has been over 1.4 million square feet

of absorption in the three major submarkets justifying

developer optimism to date. But what about the health of

the existing pipeline? Will we see continued absorption

at a comparable pace?

VIEW FROMTHE

EAGLE’S NESTRYAN PARZICK

Market Research Director

AQUILA Commercial

[email protected]

4

As of the close of 2Q 2015, there was almost 3 million

square feet of new office product under construction

across Austin—of which 34% is preleased—as well as

a multitude of other projects that are planned for all

submarkets. Companies like Google, Apple, General

Motors, Main Street Hub and Amazon are all expanding

in Austin and committing to large blocks of space in the

process. New companies are relocating to Austin to take

advantage of Texas's status as a Top 3 state with the most

competitive corporate tax environments1 and Austin's

reputation as the 12th Most Business-Friendly City in the

U.S.2 The Austin Chamber of Commerce has tracked 21

new companies expanding or relocating to Austin in 2015,

with eight of them headquartered here in Austin. For 2Q

2015, the Austin housing market was ranked second in

the Large MSA category of the Leading Markets Index by

the National Association of Home Builders. According to

the Federal Reserve, Austin currently has a 5.3% annual

job growth rate-well above what is needed to maintain

positive absorption. A compilation of forecasts predict

over 3% job growth for the rest of the year, so we remain

bullish on the Austin market and believe the new product

under construction will be absorbed while the overall

market will maintain healthy levels of vacancy.

AUSTIN BEATS THE STATE AND THE NATION IN UNEMPLOYMENT

3.1% 4.2% 5.3%

73% 67% 55%

3.1% 4.2% 5.3%

73% 67% 55%

3.1% 4.2% 5.3%

73% 67% 55%

AUSTINDown from 4.1% in 1Q 2015

TEXASDown from 5% in 1Q 2015

U.S.Down from 6.1% in 1Q 2015

HISTORICAL SNAPSHOT OF AUSTIN OFFICE SPACE

Quarter Net Rentable Area Direct Available SF Net Absorption* Direct & Sublease Vacancy Rate

Average Class A Full Service Rental Rate

2013 Q3 42,600,634 5,130,116 804,387 12.42% $33.15

2013 Q4 42,444,966 4,960,873 (14,664) 12.14% $33.32

2014 Q1 42,444,966 4,815,598 167,798 11.74% $33.47

2014 Q2 42,475,999 4,647,525 6,277 11.79% $33.44

2014 Q3 42,720,370 4,373,103 377,613 11.41% $33.67

2014 Q4 42,784,115 4,068,526 420,985 10.56% $34.78

2015 Q1 43,665,210 4,612,974 383,535 11.49% $36.27

2015 Q2 44,534,490 4,795,149 585,639 11.90% $35.60

* Absorption includes sublease space. Numbers based on CBRE statistics.

1 Bloomberg BNA. "When States Compete: How State Tax Climates Impact Corporate Investment." June 2015. Bloomberg BNA. White Paper. 12 July 2015.

2 Britt, Russ. America's Most Business-Friendly Cities. 22 May 2015. 12 July 2015.


AUSTIN CITYWIDE2Q UPDATE

585,639 SFNet Absorption

11.90%Direct & Sublease Vacancy Rate

$35.60Avg. Class A Full Service Rental Rate

LEASING ACTIVITYVacancy rates increased again this quarter but only mini-

mally, moving from 10.56% to 10.77%. As was the case last

quarter, a large volume of net rentable area came online

that increased available space. Even with the 869,280 sf

delivered, there was still significant positive absorption of

585,639 sf. Since the last quarter, full service asking rates

across Class A buildings decreased by $0.67, from $36.27

to $35.60. This decrease could be a correction stemming

from last quarter when rates jumped by almost $1.50/sf,

whereas most previous quarters experienced much small-

er increases.

6

CITY VIEW PORTFOLIO

LITTLEFIELD & SCARBROUGH BUILDINGS

SNAPSHOT:CAPITAL MARKETSMAJOR SALES TRANSACTIONSCapital market activity remained hot in 2Q 2015 with Austin office assets continuing to fetch record pricing in both on and

off market transactions.

This portfolio of eight buildings also

includes a 5.64 acre parcel that is

approved for development of a new

64,550 sf office building.

RIATA CORPORATE PARK

Market Southwest

Class A

Size 280,000 SF

Buyer Dividend Capital Diversified Property Fund

Seller Pearlmark Real Estate

Price $68,750,000

Price/SF $245.54

Notes Four Buildings

SOLD SOLD SOLD

SOLDMarket Northwest

Class A

Size 673,622 SF

Buyer Accesso Partners

Seller Spear Street Capital

Price +/- $165,037,390

Price/SF +/- $245.00

PERRY BROOKS TOWER

Market CBD

Class A-

Size 136,585 SF

Buyer Clarion Partners

Seller Barton Creek Ltd

Price +/-$65,560,000

Price/SF $479.99

Notes None

Market CBD

Class A

Size 240,568 SF

Buyer David Kahn

Seller DivcoWest

Price $84,046,680

Price/SF $349.37

Notes Two buildings


MOVING OUTThe following large users left for

new spaces or downsized.

AMDvacated 52,526 sf at The Summit

at Lantana as their presence in the

campus continues to decrease.

PUBLIC STRATEGIES moved out of 40,207 sf in San

Jacinto Center and moved into

18,012 SF in IBC Bank Plaza (also

within the CBD).

ATLASSIANleft 28,495 sf in 816 Congress and

moved into 72,486 SF in Colorado

Tower (also within the CBD).

MAJOR LEASES SIGNED Major leases signed this quarter over 25,000 sf:

SOUTHWEST• Apple signed a lease to occupy the entire Capital Ridge development

(218,000 sf), which just delivered this quarter.

• SolarWinds expanded in The Summit at Lantana with an additional 64,947 sf. It had already been leasing 230,000 sf in the former AMD campus.

NORTHWEST• Q2eBanking expanded and extended its lease at the still under construc-

tion Aspen Lake Two. In total, they will now occupy the whole building (128,900 sf).

• Google expanded its presence in 7700 Parmer by signing an expansion for 63,948 sf.

• An undisclosed tenant expanded by 39,330 sf in Research Park Plaza I.

• RenewData renewed its existing 35,759 sf at 9500 Arboretum.

• Rockwell Automation renewed 27,642 sf at 9500 Arboretum.

SOUTH• Younicos opened its North American headquarters, signing a 32,500 sf

lease in the newly completed 3100 Alvin Devane.

CENTRAL• Snow Software signed a new lease for 27,149 sf at Capstar Plaza.

SUBMARKETMAP

CBD

Central

East/Northeast

North

Northwest

Round Rock

South/Southeast

Southwest

8

AUSTIN OFFICEDEVELOPMENT PIPELINE

2015 2016 2017 planned3Q

Encino Trace I 160,849 SF Southwest

Encino Trace II 160,849 SF Southwest

Paloma Ridge I 106,200 SF Northwest

Paloma Ridge II 106,200 SF Northwest

Parmer 3.2 192,000 SF East

4Q

Lakes at TechRidge - Phase I 137,000 SF East

Lamar Central 131,722 SF Central

NorthShore 22,326 SF CBD

Domain 1 124,578 SF Northwest

Quarry Oaks III 142,570 SF Northwest

Research Park Plaza V 172,854 SF Northwest

1Q

5th + Colorado 179,000 SF CBD

Eastside Village 94,500 SF East

2Q

Aspen Lake Two 129,000 SF Northwest

Domain 5 74,787SF Northwest

4Q

Domain 8 255,000 SF Northwest

3Q

The Diamond Bldg. at Mueller 35,015 SF East

This timeline shows office projects over 30,000 SF that have either broken ground or will be breaking ground soon and

the estimated year and quarter of delivery.


2015 2016 2017 planned

1Q

500 W. 2nd Street 489,404 SF CBD

Future Developments

310 Comal 37,500 SF East

604 W. 6th Street 31,035 SF CBD

801 Barton Springs 90,000 SF South

Amber Oaks - Phase I 90,300 SF Northwest

Amber Oaks - Phase II 90,300 SF Northwest

Amber Oaks - Phase III 45,000 SF Northwest

Aspen Lake Three 128,700 SF Northwest

Austin Music Hall - CBD

Cityline at MLK 150,000 SF East

Lantana Ridge I 87,500 SF Southwest

Lantana Ridge II 87,500 SF Southwest

Mueller Market District 3,500,000 SF East

Paloma Ridge C 112,500 SF Northwest

Rainey Gateway 355,000 SF CBD

Regency Park 90,000 SF Southwest

Shoal Creek Walk 210,000 SF CBD

Terrace 3 203,130 SF Southwest



The Backyard - Bldgs. B, J, & H

171,450 SF Southwest

The Park @ Mueller 116,000 SF East

The Waterfront 625,000 SF South

Waller Park Place 325,000 SF CBD

10

HOW DO NEW OFFICE DEVELOPMENTS AFFECT SURROUNDING RENTAL RATES?

-$6

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

$4

-30 -20 -10 0 10 20 30

Pric

e Ab

ove/

Belo

w A

vera

ge A

ustin

Avg

-As-

Is N

NN

($/s

f)

Quarters Before/After New Construction

Average of New Construction Rental Price Compared to Austin Market Trend Line

6.5 years to 15 months prior to new build: The starting average rental rate trend moves from about $4.00 below to about $1.25 above the average Austin rental rate. This rise in rates is likely due to the increasing demand in the area immediately surrounding a newly constructed building, which drives developers to build new product there.

4.5 years and beyond: The difference in rates compared to the overall Austin market bottoms out and the cycle starts over. Leases are starting to expire from the new deals struck during the construction process, so demand is building again.

9 months to 4.5 years after new build: Rates in the area surrounding the new development begin to fall with respect to the overall market. Surrounding buildings are now competing for tenants with the new office space. The leases that were signed at the new building have alleviated the increased demand.

15 months prior to 9 months after new build: Rental rates level off to about $1.25 above the average Austin market rate. This can be explained by the new supply catching up to the demand in the immediate area of the new construction during the lease up period, creating a temporary equilibrium. Preleasing generally begins during this time period coinciding with construction being far enough along to allow potential tenants to see the space, so the pent up demand starts to get addressed.

WHAT DOES THIS MEAN FOR YOU?Tenants: If you are looking at space or renewing in a location close to a new project, the ideal window of opportunity

to negotiate a renewal is either as far prior to a new building's delivery or a couple of years after the new development

has delivered.

Landlords: If potential tenants are negotiating with you during the second or beginning of the third time period, it

may behoove you to do what you can to secure as much term as possible. This may be in your best interest since your

rental rates will likely have to drop by a dollar or more, relative to the rest of the market, the further away from the

new construction you get.

To see the methodology used for this report view page 50 in the Appendix.





CENTRALBUSINESSDISTRICT

2Q UPDATELooking at all classes of buildings across

the CBD, there was a significant decrease

in vacancy rates from 12.81% to 10.20%

between 1Q 2015 and 2Q 2015. This

decrease reflects the high demand for

downtown office space. The competitive

set of CBD buildings (Class A buildings

located in, or near, the core of downtown)

actually saw a slight increase in vacancy

rates, moving 51 basis points higher, from

7.52% to 8.03%. This increase is partially

attributable to the delivery of 501 Congress,

a 122,551 sf Class A building that is 81%

occupied. Additionally, some of the lower

tier buildings—ones not included in the

competitive set—increased occupancy.

12

The second quarter also saw

a decrease in Class A asking

rental rates for the overall CBD

submarket, dropping from

$43.83 to $41.90. Last quarter

it was suggested in this report

that the non-competitive

set buildings in the CBD had

higher vacancy rates partially

due to high full service rental

rates. It looks as though that issue was addressed this

quarter with lower asking rates in these spaces, pulling the

overall submarket rates down with them. The competitive

set continues to see full service asking rates raised, though,

as it remains a strong landlord’s market. The competitive

set increased rates for the 13th straight quarter, as rates

climbed from $47.28 to $47.74. It bears repeating, the

demand for higher quality space has allowed landlords to

continue to push rates while inferior buildings adhere to a

more competitive set of market forces.

501 Congress was the sole

new delivery in the CBD

this quarter. Its major

tenants include Dropbox

and Charles Schwab. No

other Class A buildings

are scheduled to deliver

downtown until 1Q 2016,

when 5th + Colorado

brings 179,000 sf online.

Currently, this development has almost 17,000 sf pre-

leased with a couple of other leases reportedly close to

being finalized.

In the entire competitive set within the CBD, there are only

five large blocks of available space for lease over 20,000 sf.

This is very limiting to potential tenants who want to move

or expand downtown. With the only large blocks available

on the horizon belonging to the 5th + Colorado and 500 W

2nd developments, the CBD will continue to build pressure.

THE DEMAND FOR HIGHER QUALITY SPACE HAS ALLOWED LANDLORDS TO CONTINUE TO PUSH RATES WHILE INFERIOR BUILDINGS ADHERE TO A MORE COMPETITIVE SET OF MARKET FORCES.

RetailMeNot at 301 Congress; Photo by Third Eye Photography


CBD DEVELOPMENT& LARGE AVAILABILITY

Building Available SF/ % Preleased

Max. Contiguous

Total SF/ Units/Rooms

Estimated Delivery Status Use

1 600 Congress 42,985 SF 29,798 SF - - Existing Office

2 Frost Bank Tower 26,607 SF 26,607 SF - - Existing Office

3 One Congress Plaza 78,908 SF 23,479 SF - - Existing Office

4 301 Congress 73,352 SF 20,899 SF - - Existing Office

5 San Jacinto Center 83,639 SF 20,338 SF - - Existing Office

6 5th + Colorado 9% 19,000 SF 179,000 SF 1Q 2016 UC Office

7 NorthShore 100% - 23,592 SF 1Q 2015 UC Office

8 500 West 2nd 43% 33,583 SF 489,404 SF 1Q 2017 UC Office

9 Westin - - 326 Hotel Rooms 3Q 2015 UC Hotel

10 Fairmont - - 1,066 Hotel Rooms 3Q 2017 UC Hotel

11 Hotel Van Zandt - - 319 Hotel Rooms 3Q 2015 UC Hotel

12 Hotel Zaza/Gables - - 226 MF Units, 160 Hotel Rooms 4Q 2016 UC Hotel/MF

13 5th & West - - 154 MF Units 4Q 2017 UC MF

14 Shoal Creek Walk - - 210,000 SF - Future Office

15 604 W 6th - - 31,035 SF - Future Office

16 Novare/Post Office - - TBD - Future Office

17 Austin Music Hall - - TBD - Future Office

18 801 Barton Springs - - 85,000 SF - Future Office

19 Austin American Statesman - - TBD - Future Office

20 Waller Park Place - - 325,000 SF - Future Office

21 Rainey Gateway - - 355,000 SF - Future Office

22 The Independent - - 370 MF Units - Future MF

23 Travis County - - TBD - Future Mixed Use

Office projectsUnder construction

OFFICE UNDER CONSTRUCTIONHOTEL/RESIDENTIAL UNDER CONSTRUCTIONFUTURE DEVELOPMENTSEXISTING AVAILABILITIES

6th Street

5th Street

Barton Springs Rd.

N. L

amar

Blv

d.

Cong

ress

Ave

.

11th Street

S. 1

st S

tree

t

Cesar Chavez St.

6th Street6th Street6th Street

5th Street

5th Street

5th Street

Barton Springs Rd.

Barton Springs Rd.

Barton Springs Rd.

N. L

amar

Blv

d.

N. L

amar

Blv

d.

N. L

amar

Blv

d.

Cong

ress

Ave

.

Cong

ress

Ave

.

Cong

ress

Ave

.

11th Street11th Street11th Street

S. 1

st S

tree

t

S. 1

st S

tree

t

S. 1

st S

tree

t

Cesar Chavez St.

Cesar Chavez St.

Cesar Chavez St.

FrostBankTower

500 W. 2nd

Northshore

TheIndependent

ShoalCreekWalk

604 W.Sixth

Novare/Post Office

600Congress

301Congress

OneCongressPlaza

FairmontHotelWallerParkPlace

RaineyGatewayHotel Van ZandtAustinAmericanStatesman

801 BartonSprings

San JacintoCenter

Westin

TravisCounty

Hotel Zaza/Gables 5th +Colorado

5th &West

AustinMusic Hall

Hotel/ResidentialUnder construction

Existing Availabilities

Future Developments

14

CBD BY THE NUMBERS



2013 Q3 9,084,414 1,058,513 (26,803) 12.07% $41.39

2013 Q4 9,084,414 1,045,081 6,826 12.00% $41.61

2014 Q1 9,084,414 1,032,112 17,164 11.81% $41.45

2014 Q2 9,084,414 1,021,461 (13,728) 11.96% $40.88

2014 Q3 9,252,285 1,041,014 153,098 11.90% $41.39

2014 Q4 9,252,285 802,517 227,661 9.44% $43.13

2015 Q1 9,768,770 1,135,835 139,236 12.81% $43.83

2015 Q2 9,809,755 870,240 291,638 10.20% $41.90

CBD SUBMARKET

0%

3%

6%

9%

12%

15%

18%

$39.00

$40.00

$41.00

$42.00

$43.00

$44.00

$45.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate

Average Class A Full Service Rental Rate Direct & Sublease Vacancy Rate

0%

2%

4%

6%

8%

10%

12%

14%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)

Direct Available SF Sublease Available SF Direct & Sublease Vacancy Rate

AVAILABLE SF VS. VACANCY RATE

83%

84%

85%

86%

87%

88%

89%

90%

91%

(50,000)

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2O

ccup

ancy

Rat

e

Abso

rptio

n (S

F)

Net Absorption* Direct & Sublease Occupancy Rate

NET ABSORPTION

VACANCY RATES VS. RENTAL RATES



7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

0%

5%

10%

15%

20%

25%

30%

35%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mar

ket S

ize

(Mill

ions

of S

F)

Tota

l Vac

ancy

Rat

e (%

)

Market Size Historic Vacancy Rate AQUILA Model 1% Job Growth 3% Job Growth

3% Job Growth

1% Job Growth

3% Job Growth

1% Job Growth

NorthShore

5th + Colorado

500 W 2nd

AUSTIN CBD OFFICE RENTAL RATE PROJECTIONS

AUSTIN CBD OFFICE VACANCY RATE PROJECTIONS

$15

$20

$25

$30

$35

$40

$45

$50

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Full

Serv

ice

Rent

al R

ates

($)

Historic Rental Rate AQUILA Model 1% Job Growth 3% Job Growth

3% Job Growth

1% Job Growth

16 7700 Parmer, Building A; Photo by Third Eye Photography


NORTHWEST SUBMARKET2Q UPDATE




LEASING ACTIVITYThe vacancy rate decreased slightly in the Northwest

submarket last quarter, moving from 11.65% to 11.56%

across all building classes. Our competitive set of buildings

(newer suburban office buildings that typically have

structured parking, amenities such as conference rooms,

workout facilities and/or delis) saw its vacancy rate shrink

even further, lowering from 9.93% to 9.00%. This larger

reduction in vacancy rates in the competitive set continues

to further the notion that higher end buildings are in

demand and continue to attract tenants looking for nicer

18

NORTHWESTSUBMARKET UPDATE

space.

Overall asking rental rates of Class A buildings in the

Northwest submarket climbed for the 6th consecutive

quarter, moving up to $32.74 from $32.06 last quarter.

The competitive set of buildings increased at a slower rate,

albeit still making a large gain of $0.44 from last quarter.

As with almost all of Austin, the NW submarket remains a

landlord’s market.

A correction to last quarter’s report regarding Apple’s

purchase of Riata Crossing Buildings 1-4 has been made

in this quarter’s report. Apple did, in fact, purchase

the 357,375 sf of office space they already leased from

Spear Street Capital, but they then resold the buildings

to DivcoWest days later. Apple is still the tenant in all

four buildings. The correction is reflected in the 1Q 2015

Competitive Set numbers.

Braker Pointe III (195,230 rsf), was added to the competitive

set this quarter due to its sole tenant, Harcourt, announcing

it will relocate to La Frontera in July of 2016. The currently

100% leased building is being marketed to potential

tenants to backfill Harcourt.

Domain 5 broke ground this quarter and is slated to bring

74,787 sf to the NW Arboretum/Domain micromarket

in March of 2016. This adds to the already underway

Domain 1 (124,557 sf; 0% preleased - delivers December

of 2015), Research Park Plaza V (172,854 sf; 0% preleased

– delivers November 2015), Quarry Oaks III (137,615 sf;

100% preleased by Bazaarvoice – delivers December

2015), Aspen Lake Two (129,000 sf; 100% preleased by

Q2eBanking – delivers May 2016), and the Paloma Ridge

development (212,400 sf split between two buildings;

0% preleased – delivers August 2015). Domain 8 is close

to starting construction, which will be the largest office

project in the Domain with 255,000 sf of office space and is

pegged to come online in December of 2016.

3305 Steck; Photo by Scott Mason Photography


As has historically been

the case, the Arboretum/

Domain micromarket

outperformed the

other two Northwest

micromarkets in terms of

rental rates and vacancy

rates. This micromarket

is in high demand as

Austinites flock to live, work, and play in the area. In

addition to the Domain developments mentioned earlier,

Brandywine Realty Trust is in the process of bringing to

market two existing office buildings (345,000 sf) adjacent

to the Domain on the IBM Broadmoor campus that will be

available in April 2016.

The vacancy rate in the Shepherd Mountain competitive set

continued to decrease and is now down to 12.41%, which

is in line with traditional levels in this micromarket. With

the recent strong absorption in the buildings belonging to

this set, rental rates continue to climb higher as well.

The Far Northwest

micromarket continues to

raise its asking full service

rental rates, even with the

slight increase in vacancy

rate. This increase in vacancy

rates is deceptive since direct

available space actually

declined but sublease

availability rose. Speculative buildings under construction

in this micromarket (Paloma Ridge and Research Park

Plaza V) are yet to sign leases, although large blocks of

available space grow increasingly scarcer.

NORTHWESTMICROMARKETS

Arboretum/Domain

Far Northwest/Round Rock

Shepherd Mountain

THE OVERALL ASKING RENTAL RATES OF CLASS A BUILDINGS IN THE NORTHWEST SUBMARKET CLIMBED FOR THE 6TH CONSECUTIVE QUARTER, MOVING UP TO $32.74 FROM $32.06 LAST QUARTER.

20

NORTHWEST BY THE NUMBERSNORTHWEST OVERALL SUBMARKET PERFORMANCE

9.0%

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

$27.00

$28.00

$29.00

$30.00

$31.00

$32.00

$33.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate


0%

3%

6%

9%

12%

15%

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)



87.0%

87.5%

88.0%

88.5%

89.0%

89.5%

90.0%

90.5%

91.0%

91.5%

92.0%

(200,000)

(100,000)

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Occ

upan

cy R

ate

Abso

rptio

n (S

F)


NET ABSORPTION




2013 Q3 16,747,039 1,914,000 682,711 11.77% $29.09

2013 Q4 16,747,039 1,745,316 158,788 10.82% $27.33

2014 Q1 16,747,039 1,635,834 102,128 10.21% $29.20

2014 Q2 16,697,337 1,493,813 (12,658) 10.02% $29.89

2014 Q3 16,697,337 1,566,544 (103,939) 10.64% $30.65

2014 Q4 16,817,337 1,540,054 137,486 10.46% $30.83

2015 Q1 17,154,310 1,879,975 98,887 11.65% $32.06

2015 Q2 17,269,310 1,819,734 116,457 11.56% $32.74* Absorption includes sublease space. Numbers based on CBRE statistics.


$15

$20

$25

$30

$35

$40

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Full

Serv

ice

Rent

al R

ates

($)


3% Job Growth

1% Job Growth

10.0

11.7

13.3

15.0

16.7

18.3

20.0

0%

5%

10%

15%

20%

25%

30%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mar

ket S

ize

(Mill

ions

of S

F)

Tota

l Vac

ancy

Rat

e (%

)


3% Job Growth

1% Job Growth

Paloma Ridge A & B

905 & 906 BroadmorAspen Lake TwoDomain 5

Domain 8Quarry Oaks IIIDomain 1Research Park Plaza V

NORTHWEST SUBMARKET OFFICE RENTAL RATE PROJECTIONS

NORTHWEST SUBMARKET OFFICE VACANCY RATE PROJECTIONS

22

NORTHWEST AUSTINLARGE OFFICE AVAILABILITY

Building Name Total Available Space Percent Subleasable

1 Amber Oaks F 78,034 SF -

2 7700 Parmer A 62,000 SF -

3 7700 Parmer B 155,774 SF -

4 7700 Parmer A 50,000 SF -

5 Research Park Five 39,237 SF -

6 Research Park Place 8 33,518 SF -

7 Riata Corporate Park 4 93,737 SF -

8 Domain 7 45,000 SF -

9 Braker Pointe I 25,694 SF -

10 Atrium Office Center 42,740 SF -

11 UFCU Plaza 25,161 SF -

12 Prominent Pointe I 27,727 SF -

13 Lakewood Center I 47,389 SF 95%

14 Ladera Bend 3 56,196 SF 100%

15 Park Centre 3 34,761 SF -

16 River Place Corporate Park VII 32,664 SF 100%

17 Travesia Corporate Park 3 33,555 SF -

89

1011

DOMAINArboretum

Pflugerville

Cedar Park Round Rock

LAKE TRAVIS

1

2 34

567

12

1314

15

16

17

Shepherd mountain


DOMAINArboretum

Pflugerville

Cedar ParkRound Rock

LAKE TRAVIS

Shepherd mountain

11

1

102

7 89

3

46 5

NORTHWEST AUSTINOFFICE DEVELOPMENT

Building Total SF Percent Preleased Estimated Delivery Status

1 Paloma Ridge A & B 212,400 SF 0% 3Q 2015 Under Construction

2 Aspen Lake Two 129,000 SF 100% 2Q 2016 Under Construction

3 Research Park Plaza V 172,854 SF 0% 4Q 2015 Under Construction

4 Quarry Oaks III 137,615 SF 100% 4Q 2015 Under Construction

5 Domain 1 124,578 SF 0% 4Q 2015 Under Construction

6 Domain 5 74,787 SF 0% 2Q 2016 Under Construction

7 Amber Oaks Phase I 90,300 SF 0% - Planned

8 Amber Oaks Phase II 90,300 SF 0% - Planned

9 Amber Oaks Phase III 45,000 SF 0% - Planned

10 Aspen Lake Three 128,700 SF 0% Planned

11 Domain 8 255,000 SF 0% 4Q 2016 Planned

Under Construction Planned


SOUTHWEST SUBMARKET2Q UPDATE

26

SOUTHWESTSUBMARKET UPDATE

The vacancy rate across all buildings in the Southwest

submarket are deceptively high this quarter, climbing

up to 12.21% from 7.98% last quarter. This is due to the

methodology CBRE employs when collecting vacancy data,

which counts leased space that has not been moved into

as vacant, hence “available.” Since we use CBRE’s data for

the overall market performance analysis, this contradicts

the dataset for the competitive set buildings (newer

suburban office buildings that typically have structured

parking, amenities such as conference rooms, workout

facilities and/or delis) due to the following: Capital Ridge,

Rollingwood I & II and 3700 San Clemente all delivered

this quarter in the SW submarket. Capital Ridge was fully

leased by Apple, Rollingwood has 206,709 sf of 214,587

sf leased, and 3700 San Clemente has 38% of 249,870 sf

leased. All of these leased spaces are considered vacant

by CBRE’s data until the tenants move in, but we do not




Treemont Plaza; Photo by Scott Mason Photography


consider these spaces as available in our competitive set.

In fact, our competitive set of SW buildings saw vacancy

rates decrease from 8.29% to 8.25% due to preleasing

activity.

Overall asking rates for Class A buildings in the Southwest

submarket decreased by $0.59 since last quarter, whereas

our competitive set of buildings increased by $0.57. This

occurrence can be explained by the high demand for higher

quality space, allowing landlords to continue to push rates

while inferior buildings adhere to a more competitive set

of market forces.

The Near Southwest micromarket has much higher

asking rental rates than the Far Southwest micromarket,

though both continue to rise. The vacancy rates for both

micromarkets remain low, even with the delivery of

multiple buildings this quarter. To further highlight the

low level of vacancy in the historically tight Far Southwest

micromarket, consider the following example. If 3700

San Clemente were taken out of the equation (currently

only 42% leased), there would be a 5.98% vacancy rate

instead of an 8.85% rate in the micromarket. One building

represents almost a 3% change in vacancy rates.

SOUTHWESTMICROMARKETS

Far Southwest

Near Southwest

FEATURED LEASING OPPORTUNITY: TREEMONT PLAZATreemont Plaza, located at 3001 Bee Caves Road and

just minutes from downtown Austin, features newly

demoed, white walled first floor space with up to

15,287 SF of availability and its own private entrance.

28

SOUTHWEST OFFICE BY THE NUMBERSSOUTHWEST OVERALL SUBMARKET PERFORMANCE

0%

2%

4%

6%

8%

10%

12%

14%

16%

$28.00

$29.00

$30.00

$31.00

$32.00

$33.00

$34.00

$35.00

$36.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate


0%

2%

4%

6%

8%

10%

12%

14%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)



83%

84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

(250,000)

(200,000)

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

200,000

250,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Occ

upan

cy R

ate

Abso

rptio

n (S

F)


NET ABSORPTION




2013 Q3 9,568,412 722,668 (28,352) 8.06% $32.15

2013 Q4 9,382,293 734,638 (204,816) 8.42% $32.50

2014 Q1 9,382,293 703,789 (22,457) 8.66% $31.19

2014 Q2 9,382,293 853,812 (150,296) 10.26% $30.72

2014 Q3 9,458,793 653,880 164,619 9.24% $31.38

2014 Q4 9,418,793 640,998 42,081 8.41% $34.87

2015 Q1 9,446,430 589,875 66,172 7.98% $34.35

2015 Q2 10,109,725 1,070,609 182,561 12.21% $33.76



5.5

6.6

7.7

8.8

9.9

11.0

0%

5%

10%

15%

20%

25%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mar

ket S

ize

(Mill

ions

of S

F)

Tota

l Vac

ancy

Rat

e (%

)


3% Job Growth

1% Job Growth

Encino Trace I & II

SOUTHWEST SUBMARKET OFFICE RENTAL RATE PROJECTIONS

SOUTHWEST SUBMARKET OFFICE VACANCY RATE PROJECTIONS

$15

$20

$25

$30

$35

$40

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Full

Serv

ice

Rent

al R

ates

($)


3% Job Growth

1% Job Growth

30

SOUTHWEST AUSTINLARGE OFFICE AVAILABILITY

Building Name Total Available Space Percent Subleasable

1 3700 San Clemente 154,602 SF -

2 CityView Center 43,819 SF 100%

3 The Park on Barton Creek 1 63,622 SF 100%

4 7500 Rialto 41,002 SF 88%

5 The Summit at Lantana 52,939 SF -

West Lake Hills

Bee cave

Barton Creek

SOU

THW

EST PKWY

1

2

3

4

5


SOUTHWEST AUSTINOFFICE DEVELOPMENT

Building Total SF Percent Preleased Estimated Delivery Status

1 Encino Trace I 161,606 SF 100% 3Q 2015 Under Construction

2 Encino Trace II 158,137 SF 15% 3Q 2015 Under Construction

3 The Terrace 3 203,130 SF 0% - Planned



6 Lantana Ridge 175,000 SF 0% - Planned

7 Regency Park 90,000 SF 0% - Planned

Under Construction Planned

West Lake Hills

Bee cave

Barton Creek

SOU

THW

EST PKWY

1 2

3456

7


THE APPENDIX

Long Term Performance of Submarkets 35

Long Term Performance: CBD vs. Suburban 36

Central Business District

Competitive Set Performance 37

Competitive Set Buildings 38

Northwest Submarket


Micromarket Performance 40

Micromarket Buildings 42

Southwest Submarket


Micromarket Performance 46

Micromarket Buildings 48

34

CITYWIDE AVAILABLE SF VS. VACANCY RATE CBD AVAILABLE SF VS. VACANCY RATE

0%

5%

10%

15%

20%

25%

30%

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Dir

ect &

Sub

leas

e Va

canc

y Ra

te

Avai

labi

lity

(SF)

Citywide Direct Availability Citywide Sublease Availability

Citywide Vacancy Rate

0%

6%

12%

18%

24%

30%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Dir

ect &

Sub

leas

e Va

canc

y Ra

te

Avai

labi

lity

(SF)

CBD Direct Availability CBD Sublease Availability CBD Vacancy Rate Citywide Vacancy Rate

NORTHWEST AVAILABLE SF VS. VACANCY RATE SOUTHWEST AVAILABLE SF VS. VACANCY RATE

0%

4%

8%

12%

16%

20%

24%

28%

32%

36%

40%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

Vaca

ncy

Rate

Avai

labi

lity

(SF)

Northwest Direct Availability Northwest Sublease Availability

Northwest Vacancy Rate Citywide Vacancy Rate

0%

7%

14%

21%

28%

35%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Vaca

ncy

Rate

Avai

labi

lity

(SF)

Southwest Direct Availability Southwest Sublease Availability

Southwest Vacancy Rate Citywide Vacancy Rate

LONG TERM PERFORMANCEOF SUBMARKETS

CITYWIDE AVERAGE CLASS A ASKING RATES ABSORPTION & OCCUPANCY RATE

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

Full

Serv

ice

Rent

al R

ate

CBD Northwest Southwest Citywide

65%

70%

75%

80%

85%

90%

95%

-2,000,000

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

Dir

ect &

Sub

leas

e O

ccup

ancy

Rat

e

Year

Ove

r Yea

r Dir

ect &

Sub

leas

e Ab

sorp

tion

(SF)

CBD Northwest Southwest Citywide Occupancy Rate

*Absorption includes sublease space.

Numbers based on CBRE statistics.


AVERAGE CLASS A ASKING RATES DIRECT & SUBLEASE VACANCY RATES

05

101520253035404550

Full

Serv

ice

Rent

al R

ate

CBD Suburban Citywide

0%

5%

10%

15%

20%

25%

30%

Dir

ect &

Sub

leas

e Va

canc

y Ra

te

CBD Vacancy Rate Suburban Vacancy Rate Citywide Vacancy Rate

DIRECT & SUBLEASE AVAILABILITY SF UNDER CONSTRUCTION

0%

5%

10%

15%

20%

25%

30%

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Dir

ect &

Sub

leas

e Va

canc

y Ra

te

Dir

ect &

Sub

leas

e Av

aila

bilit

y (S

F)

CBD Suburban Citywide Vacancy Rate

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Area

Und

er C

onst

ruct

ion

(SF)

CBD Northwest Southwest

LONG TERM PERFORMANCECBD VS. SUBURBANNumbers based on CBRE statistics.

36

CENTRAL BUSINESS DISTRICTCOMPETITIVE SET PERFORMANCE


0%

2%

4%

6%

8%

10%

12%

14%

16%

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)


NET ABSORPTION

86%

87%

88%

89%

90%

91%

92%

93%

94%

(100,000)

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2O

ccup

ancy

Rat

e

Abso

rptio

n (S

F)


VACANCY VS. RENTAL RATES

5%

7%

9%

11%

13%

15%

$43.00

$44.00

$45.00

$46.00

$47.00

$48.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate


CBD COMPETITIVE SET

Quarter Net Rentable Area

Direct Available SF

Sublease Available SF

Net Absorption*

Direct & Sublease Vacancy Rate

Avg. Class A Full Service Rental Rate

2013 Q3 5,639,134 690,990 17,977 (23,578) 12.57% $43.24

2013 Q4 5,636,079 690,237 17,977 (2,302) 12.57% $43.51

2014 Q1 5,637,136 618,961 4,210 86,100 11.05% $44.03

2014 Q2 5,637,136 576,465 25,189 21,517 10.67% $44.81

2014 Q3 5,827,916 483,868 81,356 227,210 9.70% $45.13

2014 Q4 5,827,916 503,540 69,160 (7,476) 9.83% $46.49

2015 Q1 6,344,401 421,858 55,200 612,127 7.52% $47.28

2015 Q2 6,466,952 479,092 40,409 80,108 8.03% $47.74


Building Name Net Rentable Area

Direct Available SF


Asking Rental Rate

Estimated OpEx

100 Congress 411,536 19,050 923 $35.00 $17.64

300 West 6th 454,225 6,494 0 $34.00 $18.42

301 Congress 418,338 73,352 0 $31.50 $17.95

400 West 15th 281,196 24,252 17,218 $24.50 $14.65

501 Congress 122,551 22,889 0 $32.00 $15.23

515 Congress 258,176 13,519 3,254 $32.00 $15.95

600 Congress Ave. 503,951 42,985 0 $33.00 $15.80

816 Congress 434,081 19,936 0 $27.50 $16.59

Austin Centre 326,335 17,780 5,520 $26.00 $15.88

Capitol Center 164,044 4,647 5,559 $26.00 $17.08

Capitol Tower 172,837 0 0 $27.00 $14.67

Chase Tower 389,503 0 0 $31.00 $17.90

Colorado Tower 373,334 5,948 0 $34.00 $14.49

Frost Bank Tower 535,078 26,607 0 $37.50 $19.25

IBC Bank Plaza 194,749 2,055 0 $30.00 $13.60

Lavaca Plaza 118,635 1,070 0 $29.50 $17.54

Littlefield Building 109,779 30,424 1,045 $29.00 $14.32

One Congress Plaza 518,385 72,848 6,060 $30.00 $16.69

San Jacinto Center 406,279 83,639 0 $32.00 $17.15

Scarbrough Building 130,789 11,597 830 $29.00 $12.75

Seaholm 143,151 0 0 $28.00 $12.00

CBD COMPETITIVE SET BUILDINGS

38

NORTHWEST SUBMARKETCOMPETITIVE SET PERFORMANCE


0%

2%

4%

6%

8%

10%

12%

14%

16%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)


NET ABSORPTION

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

95%

96%

(200,000)

(100,000)

-

100,000

200,000

300,000

400,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Occ

upan

cy R

ate

Abso

rptio

n (S

F)



0%

2%

4%

6%

8%

10%

12%

14%

$28.00

$29.00

$30.00

$31.00

$32.00

$33.00

$34.00

$35.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate



Direct Available SF


Net Absorption*



2013 Q3 12,292,011 1,109,885 161,848 170,517 10.35% $30.12

2013 Q4 12,293,184 1,114,662 127,432 30,812 10.10% $30.54

2014 Q1 12,293,184 1,050,027 135,810 56,257 9.65% $31.21

2014 Q2 12,242,690 1,030,332 246,257 (141,246) 10.43% $31.61

2014 Q3 12,389,252 911,833 321,739 189,579 9.96% $32.12

2014 Q4 12,845,611 1,197,426 320,587 171,918 11.82% $32.93

2015 Q1 12,931,909 992,203 292,334 319,774 9.93% $33.39

2015 Q2 13,120,924 897,208 284,035 292,309 9.00% $33.83

NORTHWEST COMPETITIVE SET



ARBORETUM/DOMAINMICROMARKET PERFORMANCE


Direct Available SF


Net Absorption*



2013 Q3 6,105,279 422,229 46,693 109,758 7.68% $31.41

2013 Q4 6,106,452 433,941 35,988 166 7.70% $32.00

2014 Q1 6,106,452 433,079 55,206 (18,356) 8.00% $32.55

2014 Q2 6,106,452 476,360 109,332 (97,407) 9.59% $33.04

2014 Q3 6,253,014 401,651 157,535 173,068 8.94% $33.66

2014 Q4 6,474,987 445,544 121,157 214,458 8.75% $34.38

2015 Q1 6,553,774 447,850 71,595 126,043 7.93% $34.46

2015 Q2 6,742,789 389,248 63,891 255,321 6.72% $34.77

ARBORETUM/DOMAIN COMPETITIVE SET


0%

2%

4%

6%

8%

10%

12%

14%

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)

Direct Available Sqft Sublease Available SF Direct & Sublease Vacancy Rate

NET ABSORPTION

86%

87%

88%

89%

90%

91%

92%

93%

94%

95%

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

200,000

250,000

300,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Occ

upan

cy R

ate

Abso

rptio

n (S

F)



6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

$31.00

$31.50

$32.00

$32.50

$33.00

$33.50

$34.00

$34.50

$35.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate



40

SHEPHERD MOUNTAIN/2222MICROMARKET PERFORMANCE


0%

4%

8%

12%

16%

20%

24%

-

100,000

200,000

300,000

400,000

500,000

600,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)


NET ABSORPTION

75%

77%

79%

81%

83%

85%

87%

89%

91%

93%

(40,000)

(20,000)

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2O

ccup

ancy

Rat

e

Abso

rptio

n (S

F)



0%

3%

6%

9%

12%

15%

18%

21%

24%

$27.00

$28.00

$29.00

$30.00

$31.00

$32.00

$33.00

$34.00

$35.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate


SHEPHERD MOUNTAIN/2222 COMPETITIVE SET


Direct Available SF


Net Absorption*



2013 Q3 2,453,857 271,916 40,399 41,015 12.73% $29.93

2013 Q4 2,453,857 274,295 40,399 (2,379) 12.82% $30.16

2014 Q1 2,453,857 276,447 29,559 8,688 12.47% $31.43

2014 Q2 2,453,857 241,923 46,956 17,127 11.77% $31.95

2014 Q3 2,453,857 211,437 92,007 (14,565) 12.37% $32.28

2014 Q4 2,688,442 389,788 127,233 21,008 19.23% $33.10

2015 Q1 2,690,750 207,238 179,538 132,553 14.37% $34.17

2015 Q2 2,690,750 181,807 152,245 52,724 12.41% $34.45*Absorption includes sublease space.


FAR NORTHWESTMICROMARKET PERFORMANCEFAR NORTHWEST COMPETITIVE SET


0%

3%

6%

9%

12%

15%

18%

-

100,000

200,000

300,000

400,000

500,000

600,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)


NET ABSORPTION

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

(80,000)

(60,000)

(40,000)

(20,000)

-

20,000

40,000

60,000

80,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Occ

upan

cy R

ate

Abso

rptio

n (S

F)



0%

2%

4%

6%

8%

10%

12%

14%

$26.00

$27.00

$28.00

$29.00

$30.00

$31.00

$32.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate



Direct Available SF


Net Absorption*



2013 Q3 3,732,875 415,740 74,756 19,744 13.14% $28.14

2013 Q4 3,732,875 406,426 51,045 33,025 12.26% $28.41

2014 Q1 3,732,875 340,501 51,045 65,925 10.49% $28.88

2014 Q2 3,682,381 312,049 89,969 (60,966) 10.92% $29.02

2014 Q3 3,682,381 298,745 72,197 31,076 10.07% $29.40

2014 Q4 3,682,182 362,094 72,197 (63,548) 11.79% $30.26

2015 Q1 3,687,385 337,115 41,201 61,178 10.26% $30.93

2015 Q2 3,687,385 326,153 67,899 (15,736) 10.69% $31.66*Absorption includes sublease space.

42

ARBORETUM/DOMAIN MICROMARKET COMPETITIVE SET BUILDINGS


Direct Available SF


Asking Rental Rate

Estimated OpEx

Northland Office Bldg. 98,888 5,654 0 $16.50 $10.24

9500 Arboretum 182,331 0 18,319 $22.00 $13.00

Arboretum Atrium 90,280 2,515 0 $21.00 $14.27

Arboretum Plaza One 146,347 0 0 $26.00 $14.23

Arboretum Plaza Two 98,828 0 0 $26.00 $14.23

Arboretum Point 150,033 0 0 $23.00 $13.44

Atrium Office Centre 119,858 42,740 0 $17.50 $9.32

Austin Oaks (12 Bldg. Office Park) 445,240 17,423 2,215 $18.00 $10.90

Balcones Centre 74,876 3,919 0 $24.00 $9.86

Braker Pointe I 77,454 25,694 0 $21.00 $13.16

Braker Pointe II 103,114 0 17,112 $21.00 $12.89

Braker Pointe III 195,230 0 0 $24.00 $12.84

Campus @ Arboretum 1 60,059 11,590 0 $22.00 $13.78

Campus @ Arboretum 2 33,135 0 0 $22.00 $13.85

Campus @ Arboretum 3 32,765 0 0 $22.00 $14.53



Colina West 69,299 0 0 $19.75 $10.71

Domain 2 143,331 0 0 $30.00 $11.00

Domain 3 179,006 0 20,816 $25.50 $10.34

Domain 4 152,012 0 0 $24.00 $11.16

Domain 7 221,973 45,000 0 $27.00 $11.33

Domain Gateway 173,962 0 0 $21.00 $14.95

Great Hills Corporate Center I 56,200 1,689 0 $26.50 $10.95

Great Hills Corporate Center II 57,988 0 0 $26.50 $10.95

Great Hills Corporate Center III 85,061 16,044 0 $26.50 $10.95

Great Hills Plaza 139,252 16,006 0 $20.00 $11.23

Greystone Plaza 78,248 14,395 0 $27.50 $12.63

Heritage Plaza 74,736 9,209 0 $28.00 $11.29

Kaleido I & II 73,149 3,282 0 $25.00 $8.77

Lakeview Plaza 120,956 6,266 0 $20.00 $10.73

Northpoint Centre I & II 151,126 5,556 0 $22.00 $11.22

Offices at the Domain - Phase I 92,955 0 0 $26.50 $14.75

Offices at the Domain - Phase II 75,509 0 0 $26.50 $13.59

One Far West 70,642 1,753 0 $23.50 $12.92

Park North I & II 133,568 6,069 0 $18.00 $11.62

Plaza 7000 155,076 3,869 0 $23.50 $10.25

Prominent Pointe I 150,149 27,727 0 $24.50 $13.65

Prominent Pointe II 102,567 0 0 $24.50 $14.70

Quarry Lake Business Center 117,512 5,048 0 $20.00 $11.08

Quarry Oaks Atrium I 165,435 7,155 0 $24.00 $11.82

Quarry Oaks Atrium II 126,000 0 0 $25.00 $11.48

Reunion Park 118,142 14,631 0 $19.50 $11.16

Stone Creek I 76,860 0 0 $22.00 $0.00

Stone Creek II 162,723 6,687 0 $22.00 $12.60

Stone Creek Park 77,185 0 0 $20.00 $13.45

Stonebridge Plaza I 193,200 0 0 $26.00 $14.40



Direct Available SF


Asking Rental Rate

Estimated OpEx

Stonebridge Plaza II 192,864 0 0 $26.00 $13.98

Stratum Exec Center - A 61,000 0 5,429 $20.00 $12.00

Stratum Exec Center - B 61,000 1,788 0 $20.00 $12.00

Stratum Exec Center - C 61,000 12,344 0 $20.00 $12.00

Stratum Exec Center - D 61,000 0 0 $20.00 $12.00

The Park at 8300 N. MoPac 93,317 6,911 0 $22.00 $13.40

UFCU Plaza 246,869 25,161 0 $20.00 $12.15

Westech 360 Bldgs. 1-4 175,529 26,044 0 $20.00 $11.93

Westpark Office 1-4 97,034 5,047 0 $28.00 $9.66


Direct Available SF


Asking Rental Rate

Estimated OpEx

Bridgepoint Square I 84,692 11,991 0 $23.00 $12.43

Bridgepoint Square II 92,459 16,391 0 $23.00 $12.43

Bridgepoint Square III 78,352 0 0 $23.00 $12.43

Bridgepoint Square IV 109,175 0 0 $23.00 $12.43

Bridgepoint Square V 76,793 3,220 0 $23.00 $12.43

Bridgepointe Plaza I 105,333 0 0 $23.00 $12.81

Bridgepointe Plaza II 72,640 6,617 0 $23.00 $12.81

Champion Office Park I & II 230,000 0 0 $26.50 $11.00

Four Points Centre I & II 192,396 0 0 $23.50 $12.62

Ladera Bend 1 56,466 0 0 $21.50 $16.34

Ladera Bend 2 45,732 2,900 0 $21.50 $13.88

Ladera Bend 3 56,196 0 56,196 $21.50 $13.83

Lakewood Center I 47,389 47,398 45,020 $20.00 $13.20

Lakewood Center II 44,611 0 13,206 $20.00 $13.20

Lakewood in the Park B 102,086 11,998 0 $19.50 $9.60

Lakewood in the Park C 78,596 0 0 $19.50 $11.80

Millennium Building 125,612 0 0 $22.00 $11.94

Park Centre Bldg.. 1 89,822 13,005 0 $18.00 $11.75

Park Centre Bldg.. 2 35,095 0 0 $18.00 $11.75

Park Centre Bldg.. 3 78,270 34,761 0 $18.00 $11.75

Reserve at Bull Creek A 43,782 7,622 0 $18.00 $12.28

Reserve at Bull Creek B 43,713 0 0 $20.00 $10.86

Reserve at Bull Creek C 43,695 0 0 $20.00 $11.44

River Place Corp. Park Bldg. 1 76,529 0 0 $21.00 $12.79

River Place Corp. Park Bldg. 2 114,491 9,987 0 $21.00 $12.43

River Place Corp. Park Bldg. 3 113,465 4,339 0 $21.00 $12.50




River Place Corp. Park Bldg. 7 69,119 0 32,664 $21.00 $14.15

Shepherd Mountain Plaza 100,937 0 5,159 $33.00 $11.28

Stone Cliff 66,027 11,578 0 $18.00 $12.73

SHEPHERD MOUNTAIN/2222 MICROMARKET COMPETITIVE SET BUILDINGS

44


Direct Available SF


Asking Rental Rate

Estimated OpEx

Amber Oaks A 78,164 0 0 $19.00 $10.94

Amber Oaks B 44,184 0 0 $19.00 $8.30

Amber Oaks C 44,184 0 0 $19.00 $8.60

Amber Oaks D 28,733 0 0 $19.00 $10.45

Amber Oaks E 63,111 0 0 $19.00 $8.03

Amber Oaks F 78,034 78,034 0 $19.00 $10.09

Amber Oaks G 106,455 9,923 14,730 $19.00 $10.01

Amber Oaks H 101,045 0 0 $19.00 $10.93

Amber Oaks I 50,313 10,828 0 $19.00 $11.63

Amber Oaks J 50,111 6,245 33,147 $19.00 $10.90

Aspen Lake 204,940 0 0 $18.50 $13.26

Crossings at Lakeline I 114,726 4,078 0 $21.00 $10.98

Crossings at Lakeline II 117,548 10,645 0 $21.00 $11.10

Parmer Business Park A, B, C 123,731 0 0 $18.50 $5.60

Parmer Business Park D, E, F 107,283 0 0 $18.50 $5.60

Pecan Park I 136,444 4,603 0 $21.50 $10.69

Pecan Park II 136,245 0 0 $19.50 $9.45

Research Park Place 7 125,701 3,790 3,500 $22.00 $11.55

Research Park Place 8 125,700 33,518 0 $22.00 $11.55

Research Park Plaza I 136,068 15,962 0 $22.50 $13.96

Research Park Plaza II 135,813 0 0 $22.50 $13.96

Research Park Plaza III 173,530 0 0 $23.00 $13.08

Research Park Plaza IV 184,114 0 0 $23.00 $13.08

Riata Corporate Park Bldg. 2 63,372 16,821 0 $22.00 $12.33




Riata Corporate Park Bldg. 6 93,835 0 0 $22.00 $12.33


Riata Corporate Park Bldg. 8 93,718 0 16,522 $22.00 $12.33


Riata Crossing Bldg. 1 81,775 0 0 $19.00 $8.00




Tower of the Hills/Tower Point 175,802 11,227 0 $19.50 $12.60

FAR NORTHWEST MICROMARKET COMPETITIVE SET BUILDINGS


SOUTHWESTCOMPETITIVE SET PERFORMANCESOUTHWEST COMPETITIVE SET


0%

2%

4%

6%

8%

10%

12%

14%

16%

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)


NET ABSORPTION

87%

88%

89%

90%

91%

92%

93%

94%

95%

96%

(200,000)

(100,000)

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Occ

upan

cy R

ate

Abso

rptio

n (S

F)



5%

6%

7%

8%

9%

10%

$33.00

$34.00

$35.00

$36.00

$37.00

$38.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate



Direct Available SF


Net Absorption*



2013 Q3 7,108,521 609,436 91,892 (47,365) 9.87% $33.51

2013 Q4 7,108,930 552,899 97,634 51,204 9.15% $33.82

2014 Q1 7,102,874 480,177 202,095 (37,795) 9.61% $34.71

2014 Q2 7,102,874 387,913 208,978 85,381 8.40% $35.06

2014 Q3 7,102,874 294,587 169,604 132,700 6.54% $35.47

2014 Q4 7,102,547 386,333 182,477 (104,946) 8.01% $36.07

2015 Q1 7,100,750 399,919 188,613 (21,519) 8.29% $36.98


46

NEAR SOUTHWESTMICROMARKET PERFORMANCE


0%

2%

4%

6%

8%

10%

12%

14%

16%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)


NET ABSORPTION

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

200,000

250,000

300,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Occ

upan

cy R

ate

Abso

rptio

n (S

F)



5%

7%

9%

11%

13%

15%

17%

$34.00

$35.00

$36.00

$37.00

$38.00

$39.00

$40.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate


NEAR SOUTHWEST COMPETITIVE SET


Direct Available SF


Net Absorption*



2013 Q3 2,718,247 252,847 30,712 22,236 10.43% $35.83

2013 Q4 2,718,656 228,673 41,301 13,994 9.93% $35.99

2014 Q1 2,712,851 209,356 143,888 (89,075) 13.02% $37.18

2014 Q2 2,712,851 191,624 165,931 (4,311) 13.18% $37.40

2014 Q3 2,712,851 174,207 126,557 56,791 11.09% $37.59

2014 Q4 2,713,137 158,703 124,248 18,099 10.43% $38.03

2015 Q1 2,711,340 143,863 125,110 12,181 9.92% $39.26



FAR SOUTHWESTMICROMARKET PERFORMANCEFAR SOUTHWEST COMPETITIVE SET


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Avai

labi

lity

(SF)


NET ABSORPTION

88%

90%

92%

94%

96%

98%

100%

(200,000)

(100,000)

-

100,000

200,000

300,000

400,000

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Occ

upan

cy R

ate

Abso

rptio

n (S

F)



0%

2%

4%

6%

8%

10%

12%

14%

16%

$29.00

$30.00

$31.00

$32.00

$33.00

$34.00

$35.00

$36.00

$37.00

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2

Vaca

ncy

Rate

Rent

al R

ate



Direct Available SF


Net Absorption*



2013 Q3 4,390,274 356,589 61,180 (69,601) 9.52% $32.07

2013 Q4 4,390,274 324,226 56,333 37,210 8.67% $32.48

2014 Q1 4,390,023 270,821 58,207 51,280 7.49% $33.19

2014 Q2 4,390,023 196,289 43,047 89,692 5.45% $33.62

2014 Q3 4,390,023 120,380 43,047 75,909 3.72% $34.16

2014 Q4 4,389,410 227,630 58,229 (123,045) 6.51% $34.86

2015 Q1 4,389,410 256,056 63,503 (33,700) 7.28% $35.57


48

NEAR SOUTHWEST MICROMARKET COMPETITIVE SET BUILDINGS


Direct Available SF


Asking Rental Rate

Estimated OpEx

Barton Creek Plaza I 72,974 24,336 0 $22.00 $12.53

Barton Creek Plaza II 64,718 2,688 0 $22.00 $11.69

Barton Creek Plaza III 64,842 6,413 0 $22.00 $11.83

Barton Oaks Plaza I 99,404 0 0 $26.00 $14.68

Barton Oaks Plaza II 116,368 11,073 0 $26.00 $14.37

Barton Oaks Plaza III 121,467 2,400 3,303 $26.00 $13.41

Barton Oaks Plaza IV 112,000 0 0 $40.00 $13.86

Barton Oaks Plaza V 119,549 5,562 4,189 $26.00 $13.80

Barton Skyway I 195,324 3,596 3,596 $25.50 $13.40

Barton Skyway II 195,639 5,639 0 $25.50 $13.79

Barton Skyway III 173,302 2,716 0 $25.50 $13.70

Barton Skyway IV 222,580 0 0 $25.50 $12.86

Centre I 39,903 1,479 0 $18.00 $12.00

Centre II 54,610 4,999 0 $19.50 $11.82

Mira Vista 121,147 0 0 $27.00 $14.09

Overlook at Gaines Ranch 50,725 0 0 $26.50 $14.17

Rollingwood Center I & II 214,587 7,878 8,000 $28.00 $12.00

Spyglass Point 58,576 0 0 $21.00 $13.45

The Park on Barton Creek 1 102,608 0 63,622 $24.50 $13.33

The Park on Barton Creek 2 102,587 0 0 $24.50 $13.33

The Terrace 1 115,460 6,354 0 $23.50 $14.90

The Terrace 2 114,635 3,232 0 $23.50 $15.03

The Terrace 6 196,717 22,450 0 $26.50 $15.62

The Terrace 7 196,215 0 19,000 $26.50 $15.59


FAR SOUTHWEST MICROMARKET COMPETITIVE SET BUILDINGS


Direct Available SF


Asking Rental Rate

Estimated OpEx

3700 San Clemente 249,870 154,602 0 $29.00 $11.50

3900 San Clemente 251,146 0 0 $25.00 $13.93

5000 Plaza on the Lake 118,063 1,086 9,980 $26.00 $14.57

7000 West at Lantana 1 & 2 136,075 0 0 $24.50 $12.13

Canyon at Wild Basin 74,580 9,755 1,283 $23.00 $11.60

Capital Ridge 216,511 0 0 $30.00 $10.56

Cielo Center 270,711 5,353 3,371 $19.50 $12.55

CityView 1 46,702 2,301 0 $20.50 $10.55

CityView 2 47,809 0 0 $20.50 $10.55

CityView 3 48,044 6,629 0 $20.50 $10.55

CityView Center 137,763 0 43,819 $24.00 $11.79

Crystal Mountain 1, 2 & 3 56,507 10,112 1,590 $26.00 $9.41

Dimensional Place I 220,000 0 0 $24.00 $12.42

Dimensional Place II 156,000 0 0 $24.00 $12.42

Escalade Bldg. A 56,701 9,440 0 $19.00 $11.92

Escalade Bldg. B 56,701 12,428 0 $19.00 $11.92

Lake Pointe Center 2 42,933 2,840 0 $27.00 $7.71

Las Cimas I 85,000 3,700 0 $24.50 $14.18

Las Cimas II 156,069 0 2,947 $26.00 $13.83

Las Cimas III 157,418 0 3,718 $26.00 $13.93

Las Cimas IV 138,008 0 2,587 $26.50 $14.47

Lost Creek Point 73,026 5,308 0 $29.00 $12.37

Parkway at Oak Hill I & II 145,475 1,779 0 $23.50 $13.07

Plaza 290 63,163 2,192 4,002 $17.50 $10.81

Plaza on the Lake I 122,530 8,936 0 $25.50 $13.84

Plaza on the Lake II 111,166 0 0 $25.50 $14.96

Rialto I 77,872 2,220 0 $22.00 $11.63

Rialto II 77,508 4,581 36,421 $22.00 $11.63

San Clemente Bldg. B 90,267 0 0 $26.50 $14.05

The Enclave 44,704 0 0 $17.00 $8.37

The Summit 1-5 (formerly AMD campus) 865,832 52,939 0 $25.00 $11.84

Travis Oaks 123,434 3,373 2,384 $22.50 $12.09

Vista Ridge I 75,131 11,837 0 $17.50 $11.33

Westlake Place 61,184 6,379 0 $20.00 $10.50

Wild Basin Atrium Park A 67,500 0 0 $16.50 $9.31

Wild Basin I 60,498 0 0 $19.00 $11.40

Wild Basin II 74,626 0 0 $19.00 $11.37

50

Step 1: Lease data was collected in the Austin suburban markets for buildings

constructed near new developments from 2002 to 2013. This yielded 42

developments to analyze.

Step 2: The developments were plotted on a map. For each new development, a fixed

radius was drawn so that all existing buildings within this ring at the time of the

development were identified for analysis.

Step 3: Starting rental rates were tracked on a quarterly basis for each of the marked

existing properties. Using the delivery of the new development as time “0,” the

tracked starting rental rates were assigned a time relative to the delivery date

(i.e. “-4” would represent the starting rental rate 4 quarters prior to delivery).

Step 4: The tracked rental rates in Step 3 were compared to the average starting rental

rates throughout Austin at the same relative time to each of the new building

deliveries. The differences of these 2 geographies were the metric used in the

study. For example, if the average starting rental rate at the time “-4” near the

new development was $30/sf and the average starting rental rate in Austin was

$28/sf at that time, then the rate above the average Austin rate was $2/sf. This

methodology normalizes the data to account for economic forces that occur

over time.

Step 5: This process was repeated for all 42 tracked buildings, and the differences

between the starting rates for the buildings close to new developments and the

overall Austin market were averaged together for each time period. The results

are displayed in the graph.

HOW DO NEW OFFICE DEVELOPMENTS AFFECT SURROUNDING RENTAL RATES?METHODOLOGYThe following methodology was used to derive the data featured in the special report on page 10 of this publication.


YOURNOTES:

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AUSTIN, TEXAS 78703

512.684.3800

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AQUILA Austin Market Report - 2Q 2015

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