RESEARCH REPORTMETRO DETROIT & WASHTENAW MARKET

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Detroit Office Market Reports Stable VacancyMARKET OVERVIEWThe fourth quarter of 2011’s Metro Detroit’s office market reports stabile vacancy rates at 19.5%. Net absorption totaled a positive 297,451 square feet in the fourth quarter 2011. Rental rates slightly decreased to $18.15 per square foot.

The drawn out recession the area is experiencing is slowly turning around. The Southeast Michigan purchasing managers’ index rebounded sharply in October, and anecdotal evidence suggests more hiring and fewer layoffs. Expansions in the motor vehicle industry will boost the Detroit economy over the next few years. Such industries as healthcare, education and professional services will also allow for modest growth.

With near stabile vacancy levels from quarter to quarter in 2011 it is believed that the market is close to bottoming out. The absorption of existing office product will continue as new development and construction are practically nonexistent.

MARKET INDICATORS Q4

Q4 2011 | OFFICE

2010 2011

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

Arrows compare current quarter to the previous year quarters historically adjusted figures.

17.0%

17.5%

18.0%

18.5%

19.0%

19.5%

20.0%

(200,000)

-

200,000

400,000

600,000

800,000

1,000,000

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Vaca

ncy

(^)

Mill

ion

Squa

re F

eet

New Supply SF Absorption SF Vacancy Rate %

RENTAL RATESA building’s vacancy is the major factor in its rental rate rather than the overall performance of a market sector. Rates range from $12.13 to $23.52 per square foot.

The Metro Detroit’s average rental rate decreased since third quarter 2011 and stands at $18.15 per square foot. This represented a $0.62 decrease from 12 months ago.

Currently, the average rental rate in the third quarter for Class A was $21.80, Class B was $17.47 and Class C was at $14.46. Detroit’s downtown average asking rental rate remained the same as third quarter at $18.68 and a $0.11 decrease to $18.17 was reported in the suburban markets.

Local landlords must continue to offer aggressive incentives on both new leases and renewals.

CONSTRUCTIONFourth quarter did not deliver any additional square feet of office product to the market.

Although no significant square footage was reported under construction, 6,859,271 square feet is reportedly planned.

continued on page 4

Total office inventory in the Detroit market area amounted to 166,879,664 square feet in 2,997 properties.

Total year to date net absorption at the end of the fourth quarter 2011 totaled a positive 1,066,235 square feet.

SALES ACTIVITY

PROPERTY NAME ADDRESS CITY SALE DATE SALE PRICE SIZE SF PER SF

Aureus Center 17515 W Nine Mile Rd Southfield 11/1/2011 4,500,000 140,417 32.05

5225 Crooks Rd Troy 11/2/2011 2,350,000 54,337 43.25

Davita Dialysis 1185 Monroe St Dearborn 10/13/2011 1,825,000 10,250 178.05

Metropolitan Title Building 622 E Grand River Ave Howell Township 10/7/2011 1,350,000 18,000 75.00

Maplecrest Professional Bldg 35450 Dequindre Rd Sterling Heights 10/20/2011 676,658 19,000 35.61

Multi-Property Sale (2) 1528-1530 Woodward Ave Detroit 12/21/2011 675,000 82,000 8.23

1700 W Hamlin Rd Rochester Hills 10/26/2011 650,000 11,000 59.09

Wright-Kay Building 1500 N Woodward Ave Detroit 12/7/2011 575,000 22,500 25.56

Riegner Building 18481 W Ten Mile Rd Southfield 12/1/2011 540,000 12,200 44.26

Network Information Building 23225 Northwestern Hwy Southfield 11/8/2011 425,000 16,500 25.76

21st Century Newspapers 26 W Huron St Pontiac 10/10/2011 235,000 12,180 19.29

Office Condo 30801 Barrington St, 1st floor Madison Heights 12/21/2011 225,000 12,000 18.75

Cedar Plaza 21649 Goddard Rd Taylor 11/10/2011 159,450 12,500 12.76

Borders Books HQ 100 Phoenix Dr Ann Arbor 12/9/2011 330,322

LEASE ACTIVITY

PROPERTY ADDRESS SUBMARKET TENANT SIZE SF

Victor Corporate Center Southern I-275 Trinity Health 340,000

320 & 340 E Big Beaver Rd Troy Flagstar Bank 94,571

5225 Crooks Rd Troy Proctor Financial, Inc. 54,337

26911-26957 Northwestern Hwy Southfield Secure-24 50,446

500 E Washington St Washtenaw Menlo Inovations 17,500

P. 2 | COLLIERS INTERNATIONAL

RESEARCH REPORT | Q4 2011 | OFFICE | DETROIT

SUBLEASE TOTAL NET ABSORP WEIGHTEDTYPE BLDGS VACANCY VACANCY 4Q UNDER AVG

RATE RATE Period YTD SF 4Q SF YTD SF CONSTR PROPOSED RATEDOWNTOWN MARKETSDetroit CBD and New Center AreaA 24 11,416,221 1,743,774 15.3% 56,075 0.5% 1,799,849 15.8% 70,406 220,440 - - - - $22.46B 94 15,588,887 2,659,358 17.1% 22,963 0.1% 2,682,321 17.2% 239,585 (6,170) - - - - $16.39C 74 4,027,080 1,534,744 38.1% 0 0.0% 1,534,744 38.1% 17,009 36,066 - - - - $16.81All 192 31,032,188 5,937,876 19.1% 79,038 0.3% 6,016,915 19.4% 327,000 495,739 - - - - $18.68Outer Detroit: Dearborn, Downriver, Airport, The PointesA 26 5,656,729 377,922 6.7% 123,590 2.2% 501,512 8.9% 0 (135,161) - - - 594,604 $20.47B 189 11,396,256 2,889,561 25.4% 51,604 0.5% 2,941,165 25.8% (11,878) (115,044) - - - 28,000 $18.34C 172 5,986,573 685,911 11.5% 0 0.0% 685,911 11.5% 26,729 166,590 - - - - $12.13All 387 23,039,558 3,953,394 17.2% 175,194 0.8% 4,128,588 17.9% 14,851 (83,615) - - - 622,604 $17.25DOWNTOWN TOTALSA 50 17,072,950 2,121,696 12.4% 179,665 1.1% 2,301,361 13.5% 70,406 85,279 - - - 594,604 $21.80B 283 26,985,143 5,548,919 20.6% 74,567 0.3% 5,623,486 20.8% 227,707 124,189 - - - 28,000 $17.21C 246 10,013,653 2,220,655 22.2% 0 0.0% 2,220,655 22.2% 43,738 202,656 - - - - $14.01All 579 54,071,746 9,891,270 18.3% 254,232 0.5% 10,145,503 18.8% 341,851 412,124 - - - 622,604 $18.07SUBURBAN MARKETSI-696 Corridor: Madison Heights, Royal Oak, Ferndale, SouthfieldA 25 6,134,905 1,416,589 23.1% 73,082 1.2% 1,489,671 24.3% (10,194) (4,815) - - - 949,000 $21.35B 231 14,999,500 3,116,045 20.8% 99,281 0.7% 3,215,326 21.4% 69,414 124,499 - - - 85,550 $16.64C 174 5,074,828 656,806 12.9% 10,400 0.2% 667,206 13.1% 3,685 36,771 - - - - $13.57All 430 26,209,233 5,189,440 19.8% 182,763 0.7% 5,372,204 20.5% 62,905 156,455 - - - 1,034,550 $17.15Oakland County Central: Birmingham, Bloomfields, TroyA 43 7,097,893 1,900,867 26.8% 6,333 0.1% 1,907,200 26.9% (89,624) 15,063 - - - 876,428 $20.64B 270 14,642,307 4,407,852 30.1% 72,820 0.5% 4,480,672 30.6% 150,338 285,661 - - - 156,550 $18.72C 86 2,064,099 281,106 13.6% 550 0.0% 281,656 13.6% 1,856 34,363 - - - - $15.72All 399 23,804,299 6,589,825 27.7% 79,703 0.3% 6,669,529 28.0% 62,570 335,087 - - - 1,032,978 $19.03Northern Oakland County: Rochester, Auburn Hills, Clarkston, Lake Orion, PontiacA 16 6,405,214 303,955 4.7% 22,321 0.3% 326,276 5.1% (125,310) (92,816) - - - 299,852 $23.52B 142 7,142,175 2,550,105 35.7% 101,670 1.4% 2,651,775 37.1% 39,155 271,030 - 36,897 - 197,201 $16.84C 83 2,544,044 506,103 19.9% 0 0.0% 506,103 19.9% (12,191) (3,623) - - - - $15.03All 241 16,091,433 3,360,163 20.9% 123,991 0.8% 3,484,155 21.7% (98,346) 174,591 - 36,897 - 497,053 $19.21Macomb County Area: Warren, Sterling Heights, Shelby Twp., Roseville, Clinton Twp., Saint Clair Shores, Macomb Twp.A 11 610,296 151,949 24.9% 0 0.0% 151,949 24.9% (15,029) 13,678 - - - 70,327 $20.34B 258 6,560,988 1,224,996 18.7% 6,736 0.1% 1,231,732 18.8% (44,431) (15,148) - - - 196,402 $17.39C 154 2,965,415 277,353 9.4% 3,600 0.1% 280,953 9.5% 10,710 (19,875) - - - - $13.38All 423 10,136,699 1,654,298 16.3% 10,336 0.1% 1,664,635 16.4% (48,750) (21,345) - - - 266,729 $16.39I-96 Corridor: Novi, Howell, Brighton, South Lyon, FarmingtonA 27 3,371,465 661,328 19.6% 4,551 0.1% 665,879 19.8% (24,686) 41,613 - - - 1,582,078 $20.46B 257 9,981,478 1,220,613 12.2% 16,658 0.2% 1,237,271 12.4% 681 94,182 - 138,770 - 501,608 $19.37C 89 1,765,175 233,377 13.2% 0 0.0% 233,377 13.2% 14,761 62,046 - - - - $16.22All 373 15,118,118 2,115,318 14.0% 21,209 0.1% 2,136,527 14.1% (9,244) 197,841 - 138,770 - 2,083,686 $19.25I-275 Corridor: Livonia, Westland, Canton, Plymouth, NorthvilleA 11 1,579,078 399,518 25.3% 4,655 0.3% 404,173 25.6% 20,029 131,534 - - - 100,000 $20.45B 149 4,847,222 923,385 19.0% 17,522 0.4% 940,907 19.4% (47,062) (42,347) - - - 171,204 $16.71C 75 2,203,613 205,618 9.3% 0 0.0% 205,618 9.3% 295 23,725 - - - - $15.77All 235 8,629,913 1,528,521 17.7% 22,177 0.3% 1,550,699 18.0% (26,738) 112,912 - - - 271,204 $17.15SUBURBAN TOTALSA 133 25,198,851 4,834,206 19.2% 110,942 0.4% 4,945,148 19.6% (244,814) 104,257 - - - 3,877,685 $21.50B 1,307 58,173,670 13,442,996 23.1% 314,687 0.5% 13,757,683 23.6% 168,095 717,877 - 175,667 - 1,308,515 $17.75C 661 16,617,174 2,160,363 13.0% 14,550 0.1% 2,174,913 13.1% 19,116 133,407 - - - - $14.60All 2,101 99,989,695 20,437,565 20.4% 440,179 0.4% 20,877,745 20.9% (57,603) 955,541 - 175,667 - 5,186,200 $18.17WASHTENAW COUNTYA 24 3,383,716 274,278 8.1% 0 0.0% 274,278 8.1% (9,749) 1,448 - - - 767,381 $23.98B 219 7,976,860 1,020,562 12.8% 1,969 0.0% 1,022,531 12.8% 26,682 (323,215) - 10,370 - 283,086 $16.33C 74 1,457,647 159,567 10.9% 0 0.0% 159,567 10.9% (3,730) 20,337 - - - - $15.89All 317 12,818,223 1,454,407 11.3% 1,969 0.0% 1,456,376 11.4% 13,203 (301,430) - 10,370 - 1,050,467 $18.30MARKET TOTALS – DOWNTOWN, SUBURBAN, AND WASHTENAW COUNTYA 207 45,655,517 7,230,180 15.8% 290,607 0.6% 7,520,787 16.5% (184,157) 190,984 - - - 5,239,670 $21.80B 1,809 93,135,673 20,012,477 21.5% 391,223 0.4% 20,403,700 21.9% 422,484 518,851 - 186,037 - 1,619,601 $17.47C 981 28,088,474 4,540,585 16.2% 14,550 0.1% 4,555,135 16.2% 59,124 356,400 - - - - $14.46All 2,997 166,879,664 31,783,242 19.0% 696,380 0.4% 32,479,624 19.5% 297,451 1,066,235 - 186,037 - 6,859,271 $18.15QUARTERLY COMPARISON AND TOTALSQ4-11 2,997 166,879,664 31,783,242 19.0% 696,380 0.4% 32,479,624 19.5% 297,451 1,066,235 - 186,037 - 6,859,271 $18.15Q3-11 2,988 166,637,012 31,626,335 19.0% 711,145 0.4% 32,337,482 19.4% 0 768,784 125,000.00 186,037 - 6,825,717 $18.23Q2-11 2,988 165,648,239 31,012,221 18.7% 802,432 0.5% 31,814,655 19.2% 0 654,854 34,172.00 61,037 24,000 6,639,117 $18.31Q1-11 2,973 164,848,750 31,351,291 19.0% 1,024,987 0.6% 32,376,280 19.6% 0 (137,235) 26,865.00 26,865 3,500 6,420,948 $18.50Q4-10 2,940 164,292,884 30,145,024 18.3% 993,834 0.6% 31,138,860 19.0% 924,996 223,249 44,500.00 87,720 8,885 6,499,918 $18.77Q3-10 2,911 163,189,957 30,709,526 18.8% 986,171 0.6% 31,695,699 19.4% 0 (701,747) 27,220.00 16,000 740,309 6,925,908 $18.75Q2-10 2,891 162,710,814 30,323,377 18.6% 1,005,839 0.6% 31,329,218 19.3% 0 (612,530) 16,000.00 16,000 202,528 7,311,514 $18.98Q1-10 2,931 168,406,862 29,844,859 17.7% 1,245,183 0.7% 31,090,044 18.5% (510,483) - - 149,709 7,764,636 $18.92Q4-09 2,895 166,790,401 29,081,419 17.4% 1,346,110 0.8% 30,427,531 18.2% (1,639,828) (2,830,949) 88,719.00 165,557 285,409 8,114,232 $19.10Q3-09 2,843 163,465,688 27,428,354 16.8% 1,033,600 0.6% 28,461,956 17.4% 0 (1,191,121) 20,872.00 76,838 223,575 6,378,890 $19.20Q2-09 2,819 161,069,549 27,376,284 17.0% 1,011,099 0.6% 28,387,385 17.6% 0 (654,896) - 55,966 197,463 8,361,715 $19.38

COMPLETIONS CONSTRUCTION SFTOTAL

INVENTORY SF

DIRECT

VACANT SF

DIRECT

VACANCY

RATE

SUBLEASE

VACANT SF

TOTAL

VACANT SF

NET

RESEARCH REPORT | Q4 2011 | OFFICE | DETROIT

COLLIERS INTERNATIONAL | P. 3

VACANCYThe overall office vacancy rate in the Metro Detroit market stands at 19.5% in the fourth quarter 2011 which is .5% higher than it was 12 months ago.

The average vacancy rate for Class A projects was 16.5%, Class B projects 21.9% and Class C projects 16.2%. Detroit’s Downtown vacancy rate increased to 19.4% while the Suburban vacancy remained about the same at 20.9% in the fourth quarter of 2011.

The Oakland County Central submarket reported the highest vacancy rate at 28.0% while the Washtenaw County submarket came in the lowest at 11.4%

ABSORPTION/LEASING ACTIVITYNet absorption for the overall office market in the fourth quarter 2011 amounted to a positive 297,451 square feet, an increase from last quarter.

The Downtown Detroit submarket reported the highest absorption while the Northern Oakland County came in with the lowest.

SALES ACTIVITYAt the end of the third quarter of 2011, total office building sales activity was down compared to 2010. In the first nine months of 2011 the market recorded 35 office sales transactions with a total volume of over $128 million. The price per square foot averaged $35. In the same nine months of 2010, 38 transactions posted with a total volume of over $207 million. The price per square foot averaged $70.

Cap rates have been higher in 2011, up near 10.5% compared to 9.5% this time last year.

OUTLOOK FOR BUYERS AND SELLERS• Buyers market if buyer can obtain financing• More motivated sellers• Economic recovery is not taking hold; thus,

more renters than buyers

OUTLOOK FOR TENANTS AND LANDLORDS• Tenant’s market • Many landlord’s are cash strapped and do

not have the funds for tenant improvements• Rent is treading down to entice both

renewal and new tenants• Short term leases are becoming more

popular

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Copyright © 2011 Colliers International.

Source material and statistical information, unless otherwise noted, is provide by The CoStar Group, Real Capital Analytics, REIS, Bureau of Labor Statistics, and Colliers-Detroit Research Department. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of thematerial contained in this report.

RESEARCH DEPARTMENT:

Michelle McGuckinResearch Coordinator | Detroit | Ann ArborTEL +1 248 226 1848FAX +1 248 226 1849

RESEARCH REPORT | Q4 2011 | OFFICE | DETROIT