State of the market: the year of expansion.

OFFICE MARKET

UTAH OVERVIEW

2015 saw Utah companies express their faith in the future by securing quality, Class A space under construction in popular locations. Lehi, Draper, Cottonwood and downtown Salt Lake experienced combined pre-leasing of over 1,750,000 square feet, with 75% occurring in Utah County. These pre-leases are not factored into the 2015 year-end absorption rates, so expect to see more positive absorption in 2016. By contrast, less popular locations and older properties are seeing significantly less absorption and minimal lease rate increases. Not only is new Class A construction attracting the majority of client growth, but clients are trading up from Class B and C properties as their finances improve.

2015 VACANCY [down arrow] ABSORPTION [up arrow] LEASE RATES [up arrow] 3 MILLION

Utah has a population of 3 million, up 6.5% from 2010 (compared to 3.3% growth nationwide).

2ND FASTEST

Utah has the second-fastest-growing population in the nation. The state's well-educated population has helped to build one of the nation's strongest and most dynamic economies.

NO. 1

Utah named #1 for tech concentration and dynamism by the State Tech and Science Industry.

SALT LAKE COUNTY OFFICE MARKET

Ideal locations in the Salt Lake market are experiencing high amounts of pre-leasing activity while Class B buildings are the next-best option for some

COUNTY SUMMARY

This year the Salt Lake County office market had over 1.1 million square feet of office space completed. Most of these buildings were in the South Submarket. Currently, over two million square feet of space is under construction and scheduled to be completed by mid-year 2016. Pre-leasing activity has become a trend to watch in the Salt Lake County market. Once tenants move into their newly constructed space, the previous location has been marketed heavily and new tenants are committing to back-fill the existing space prior to it becoming available to the market. With the overall vacancy rate decreasing from 10.02% this time last year to a current rate of 8.60%, there is limited availability in ideal locations for office tenants. The largest decrease in vacancy was found in the Class B buildings year over year with a 2.88 percentage point decrease. Class A space had the least amount of vacancy in the entire market, averaging 7.35%. Vacancy in Class A properties has remained relatively unchanged even with the additional 1.1 million square feet of completed construction, showing a consistent demand for quality Class A buildings in the Salt Lake County market. This explains the growing trend of tenants who are leasing up higher quality Class B buildings to fit their immediate needs. The overall weighted average asking lease rate also increased $2.30 from this time last year to a current rate of $22.40 full service.

CONSTRUCTION Salt Lake County office construction activity by quadrant CENTRAL EAST 4% CENTRAL WEST 10% NORTHEAST 19% SOUTH WEST 43% NORTH WEST 5% SOUTH EAST 19% 2.04M

Total 2,044,909 SF Under Construction

ABSORPTION RATES Salt Lake County YTD overall absorption 2015 2014 2013 2012 2011 2010 713K 850K 374K 437K 1.09M 252K 713,360 850,589 374,104 437,502 1,092,896 252,002 VACANCY RATES 2015 8.60% 2014 10.02% 2013 12.43% 2012 12.31% 2011 12.70% 2010 15.24% SALT LAKE DOWNTOWN VS. SUBURBAN OFFICE MARKET

SUBMARKET SUMMARY

With certain areas of the office market developing at a rapid pace, overall lease rates have constantly increased over the last 10 years. Class A downtown office asking lease rates came in at $27.33 full service. If we observe only newer Class A office buildings downtown, the asking lease rates average $30.00 full service. Older Class A buildings in the downtown market range from $23.00 full service to $26.00 full service. Based on the majority of older Class A buildings currently available, we see Class A asking lease rates not increasing as much as Class B or C buildings in the downtown market. Overall suburban Class A increased to $27.33 full service. This is $4.31 more than this time last year. The main cause for this increase in the suburban market is the new available space being listed in the $31.00 full service range located in the Cottonwood submarket compared to last year's average of $26.93 full service. Experts expect to see lease rates stabilize in 2016 as new construction is completed and a steady balance of competitive options are available for tenants to locate in the market.

VACANCY RATES Historic overall office vacancy Downtown SLC 2015 11.51% 2014 12.25% 2013 14.71% 2012 15.05% 2011 13.32% 2010 14.45% Suburban SLC 2015 6.91% 2014 8.76% 2013 11.13% 2012 10.73% 2011 12.34% 2010 15.70% UTAH COUNTY OFFICE MARKET

It's all about location when it comes to office market activity

COUNTY SUMMARY

The Utah County office market experienced a slightly imbalanced rate of market activity. The Utah County North Quadrant saw the most significant amounts of pre-leasing activity, increased rates, and minimal concessions being offered. The North Quadrant's lease rates increased from $19.52 full service this time last year to a current rate of $24.02 full service. The Central Quadrant's average asking lease rate only increased slightly from $17.57 full service in 2014- to the current rate of $18.08 full service. Some landlords on the southern part of the North Quadrant struggled to compete with the activity occurring in the heart of Silicon...