Office Market Snapshot

Raleigh-Durham Fourth Quarter 2011

Market Tracker
*Arrows = Current Qtr Trend

Vacancy
18.3%

Net Absorption
175,336 SF

Deliveries
48,300 SF

Asking Rent
$19.55 SF

Cautious Optimism Heading Into 2012

The Triangle office market closed out 2011 on a good note after posting 175,000 square feet of positive net absorption over the fourth quarter. As a result, the overall vacancy rate declined to 18.3 percent and is now at its lowest level since the first quarter of 2009. For the year, net absorption was positive and totaled 137,315 square feet, including positive 427,000 square feet of net absorption in the Class A sector. In addition to the recorded demand, the market experienced a noticeable uptick in new activity over the quarter, a sign that bodes well for area fundamentals in 2012. Much of the demand is being generated from organic growth within the market from the Triangles usual suspects, as technology, professional services and health care related companies continue to expand in the market. The region scored a significant win this quarter when open source giant Red Hat finalized plans to sublease 380,000 square feet of space in Downtown Raleigh from Progress Energy. The sublease is for 23 years and gives downtown Raleigh an ideal anchor tenant that adds more diversity to the CBD workforce. After a relatively uneventful third quarter, investment sales activity for office space picked up over the past few months. In one of the largest transactions of the year, Duke Realty completed the sale of their six building portfolio to the Archon Group in January 2012. Cassidy Turley represented the seller in the transaction, ushering in yet another first time, out-of-town institutional office buyer to the market. The three largest office sale transactions over the past twelve months have each traded hands to an out-of-town first time buyer, an indication of how strong the areas economy is viewed nationwide. Looking ahead to 2012, economic headwinds will once again be present with the current issues in Europe and this being an election year. However, the Triangle continues to outperform the nation in creating net job growth, especially in office-using sectors such as business and professional services, technology and healthcare, and this will continue to move the market in a positive direction. It is likely that the year ahead will bring slow, gradual improvement, hopefully setting the stage for an exceptionally healthy 2013.

Raleigh Office

Economic Indicators
Q4 11
Triangle Employment Triangle Unemployment U.S. Unemployment U.S. CCI 787.9K 7.8% 8.3% 57.05

Q4 10
777.4K 8.0% 9.1% 53.53

(Consumer Confidence Index)

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

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

Forecast
05 07 09

Consistent demand is expected for the first half of 2012, followed by modest activity over the second half of the year due to election paralysis Asking rates for specific, well-positioned Class A properties are stabilizing and could begin to increase in 2012 50,000 square foot and greater blocks of quality contiguous space are limited in both Class A and B properties in top performing submarkets Rhetoric over the prospect of speculative construction is starting to pick up, perhaps foreshadowing construction of a speculative office building starting at some point in 2012 A wave of distressed commercial assets is expected to hit the market this year, as lenders and special servicers who have previously been preoccupied with unloading residential assets, begin to focus on their commercial holdings

20 10

06

08

Office Net Absorption

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

20 11

20

20

20

20

20

The Triangle, which added 10,500 jobs in the 12 month period ending in November 2011, will continue to perform well relative to other markets around the country Demand for smaller, commoditized vacancies is expected to improve slightly, however, these properties will continue to struggle in 2012
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cassidy Turley Office Market Snapshot

Raleigh-Durham Fourth Quarter 2011
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 116 36 52 76 20 30 170 13 150 191 5,648,582 1,541,391 3,007,403 4,458,505 462,277 1,462,947 8,424,408 243,587 8,745,326 13,045,287 101,833 34,376 121,071 366,539 148,720 770,321 274,799 294,614 511,953 106,596 642,054 1,524,452 109,618 1,179,265 3,184,728 13.6% 17.8% 9.8% 11.5% 23.1% 43.9% 18.1% 45.0% 13.5% 24.4% 91,393 25,266 4,764 16,257 437 (8,009) 92,766 (1,393) (19,500) (26,645) 154,043 44,010 17,932 (59,698) (27,571) (12,481) 157,841 25,471 46,568 (208,800) $19.65 $22.65 $20.30 $19.95 $16.60 $16.80 $18.60 $16.15 $18.40 $18.45 $21.45 $23.60 $23.00 $22.05 N/A N/A $21.30 $17.05 $21.75 $20.25

TRiangle MaRkeT TOTalS

Class A Class B Class C 354 388 112 854 29,314,859 14,656,070 3,043,092 47,039,713 772,539 4,263,686 3,637,097 697,617 8,598,400 14.5% 24.8% 22.9% 18.3% 93,725 94,255 (12,644) 175,336 427,196 (176,137) (113,744) 137,315 $21.35 $17.10 $14.15 $19.55

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 4Q 11

pROpeRTy
100 E. Davie Street 8081 Arco Corporate Drive 10010 Falls of Neuse Road 801 Jones Franklin Road hock plaza ii 3600 Glenwood Avenue 4401 Research commons generation plaza Quadrangle i 6501 Weston

Office Submarkets
Raleigh / Durham
TenanT
Red Hat RBC Bank WakeMed Stantec veritas collaborative Piedmont Financial entegrion Sessoms & Rogers, p.a. nc health care innovation SciQuest

Sf
380,000 43,300 28,000 27,000 21,000 15,300 12,685 12,100 12,000 11,900

TRanSacTiOn Type
Sublease Sublease Expansion Renewal lease Lease Renewal lease lease Expansion

SuBMaRkeT
Downtown Raleigh US 70 / Glenwood North Raleigh West Raleigh
4 1 2

3 11
Raleigh Durham Int. Airport

South Durham West Raleigh RTp / i-40 RTp / i-40 South Durham Cary
1. 2. 3. 4. 5. 6. 7. 8.
5

10
40

12

13

15 9

440

14
40

40

Key Sales Transactions YTD

pROpeRTy
keystone Technology park Quintiles plaza Trinity Place nottingham hall

Sf
806,000 260,000 111,762 105,400

SelleR/BuyeR
The lionstone group franklin Street properties Brookdale Group Brookdale group

pRice
$88,800,000 $75,800,000 $15,400,000 $13,605,000

SuBMaRkeT
RTp/i-40 RTp/i-40 West Raleigh RTp/i-40

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

David finger
Senior Vice President Managing Principal 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.

Bold Text = cassidy Turley Transaction

about cassidy Turley

Cassidy Turley is a leading commercial real estate services provider with more than 3,400 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 $18 billion in 2010, manages 455 million square feet on behalf of private, institutional and corporate clients and supports more than 25,000 domestic corporate services locations. Cassidy Turley serves owners, investors and occupiers 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. In 2010, the firm enhanced its global service delivery outside of North America through its partnership with GVA. Please visit www.cassidyturley.com for more information about Cassidy Turley.

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