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Office Market Snapshot

Raleigh-Durham Second Quarter 2012


Market Tracker
*Arrows = Current Qtr Trend

Vacancy
17.5%

Net Absorption
183,558 SF

Deliveries
18,000 SF

Asking Rent
$19.73 SF

Slow & Steady Growth Continues


After a steady 2011, the market has posted numbers over the first half of 2012 that demonstrate consistent, positive momentum, despite national data suggesting that overall economic growth rate is nearly half of what it was last year. While the numbers are not reminiscent of pre-2008, the market is on pace to post 600,000 square feet of net absorption for 2012. The majority of this demand for space was experienced in the Cary and RTP submarkets, which totaled over 200,000 square feet of positive net absorption. This growth, along with much of the rest in the
Raleigh Office

Triangle, was caused by large tenant organic growth. With some tenants moving to larger spaces, we have seen a musical chairs effect, where other growing tenants then sublease
Q2 12 Q2 11
894K 8.4% 9.0% 61.8

Economic Indicators

previously occupied spaces. This organic expansion is significant because several years ago these same tenants were giving up their space to cut costs. In macro, we view the quarters 184,000 square feet of absorption as a positive indicator for the markets trajectory. The market has seen a flight-to-quality over the recent quarters; however this trend seems to be nearing an end. Class A inventory is stabilizing and the availability for contiguous, large blocks (greater than 30,000 square feet) of space is dwindling. The recent bump in sublease activity has played a large role in this diminishing supply, allowing Class A space in the Triangle to realize the greatest percentage of net absorption in the second quarter, with 109,000 square feet. The past quarters growth has resulted in a decrease in the vacancy rate, by about five basis points, to its current rate of 17.48%. Following a robust 2011, the first half of 2012 has continued to see a healthy amount of investment sales activity. The second quarter witnessed numerous one-off, smaller deals that have helped keep the market active. The most notable deal that closed this past quarter was 11000 Weston Parkway. Cassidy Turley represented Highwoods DLF 98/29 LP in the

Triangle Employment Triangle Unemployment U.S. Unemployment U.S. CCI

907.1K 7.8% 8.2% 65.2

(Consumer Confidence Index)

Net Absorption
2,000
Square Feet ('000s)

1,500 1,000 500 0 -500 -1,000

05

06

08

09 20 10

20 11

07

20

20

20

20

20 12

disposition of the 178,000 square foot, Class A office building for $26 million. Out-of-market investor interest in the Triangle continues to be strong, and is expected to continue in that regard.

20

Office Net Absorption

Vacancy Rate
20% 18% 16% 14% 12% 10% 8% 2006 2007 2008 2009 2010 2011 Historical Average

Forecast
Absorption will increase over the next year Nearing an end to the flight-to-quality pattern, lower grade options will receive more attention from tenants seeking larger blocks of space Expect to see a continuation of the same trends in the coming quarters, with increases in demand

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cassidy Turley Office Market Snapshot


Raleigh-Durham Second Quarter 2012
TOTal BlDgS invenTORy SuBleT vacanT TOTal vacanT Sf DiRecT vacancy % cuRRenT neT aBSORpTiOn yTD neT aBSORpTiOn unDeR cOnSTRucTiOn aveRage
(all claSSeS)

aveRage
(claSS a)

aSking RenT aSking RenT

Submarket
Cary Chapel Hill Central Durham Downtown Raleigh and Cameron Village Eastern Wake County Northern Durham North Raleigh* Southern Wake County West Raleigh and US 70 / Glenwood I-40 / RTP / South Durham 120 35 52 80 20 30 176 11 153 189 5,772,890 1,521,338 3,007,403 4,520,579 436,585 1,325,590 8,220,673 243,587 8,771,752 12,894,890 182,491 59,376 146,785 321,191 234,139 787,608 281,961 314,413 512,612 154,878 550,086 1,473,765 113,253 1,100,528 2,874,643 13.6% 18.5% 10.5% 11.3% 35.5% 41.5% 17.9% 46.5% 12.5% 22.3% 63,635 (28,254) (25,382) (15,580) (44,885) (7,200) 5,145 0 28,858 207,221 23,745 (8,562) (19,799) (34,519) (48,282) (27,195) 45,063 (10,564) 103,877 243,568 60,053 132,000 $20.42 $23.17 $21.30 $21.43 $16.65 $20.59 $20.59 $17.17 $20.97 $19.90 $20.72 $24.35 $23.58 $22.71 N/A $21.29 $21.90 $17.79 $21.18 $20.45

TRiangle MaRkeT TOTalS


Class A Class B Class C 356 399 110 866 29,305,623 14,399,526 3,010,138 46,715,287 943,982 4,103,244 3,413,642 646,861 8,163,747 14.0% 23.7% 21.5% 17.5% 108,729 55,739 19,090 183,558 183,053 110,513 11,644 267,332 132,000 60,053 192,053 $21.38 $17.26 $15.41 $19.73

TOTal

Office asking rents converted to Full Service *Includes Six Forks Rd, Falls of the Neuse Rd & US 1/Capital Blvd

Ofce Submarkets
Raleigh / Durham

Key Lease Transactions 2Q 12


pROpeRTy
1700 West Perimeter Park Dr. 3800 Paramount Parkway 4800 North Park Regency Lakeview

Office Submarkets
Raleigh / Durham
TenanT
Novella Clinical, Inc. WorldWide Clinical Trials N/A HTC

Sf
77,239 30,000 29,057 25,050

TRanSacTiOn Type
Lease Lease Lease Lease

SuBMaRkeT
RTP/RDU
1

RTP/RDU Six Forks/Falls of Neuse Cary


4

3 11
Raleigh Durham Int. Airport

10
40

12

13

Key Sales Transactions 2Q 12


pROpeRTy
11000 Weston parkway elion-hitchings Building 52 Maughan Drive 8325 US Highway 70 East 718 Rutherford St

5 6

15 9

440

14
40

Sf
178,300

SelleR/BuyeR
highwoods Dlf 98/29 lp/highwoods properties glaxoSmithkline/united Therapeutics corp Walthom Group Partnership/Klopfer Associates NC LLC Sehed Investment Group/Chartwell Property Group

pRice
$26,000,000

SuBMaRkeT
cary
7

40

697,569

$17,500,000

RTp/RDu
1. 2. 3. 4. 5. 6. 7. 8. Orange County North Durham Central Durham South Durham RTP / I-40 Corridor Cary Southern Wake County Eastern Wake County 9. West Raleigh 10. US 70 / Glenwood Ave. 11. Six Forks Road 12. Falls of Neuse Road 13. US 1 / Capital Blvd 14. Downtown Raleigh 15. Cameron Village

41,632 22,208

$7,100,000 $6,100,000

Johnston County Downtown Durham

Bold Text = cassidy Turley Transaction

David finger
Senior Vice President Managing Principal

about cassidy Turley


Cassidy Turley is a leading commercial real estate services provider with more than 3,600 professionals in more than 60 offices nationwide. The company represents a wide range of clientsfrom small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2011, manages 455 million square feet on behalf of institutional, corporate and private clients and supports more than 28,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate servicesincluding capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley.

3110 Edwards Mill Road Suite 210 Raleigh, NC 27612 Tel: 919.789.4255 Fax: 919.789.0268 Email: David.Finger@cassidyturley.com
The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. Copyright 2012 Cassidy Turley.

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