NINE YEARS & STILL GOING STRONG U.S. Economic & Commercial Real Estate Outlook. July 2018

NINE YEARS & STILL GOING STRONG U.S. Economic & Commercial Real Estate Outlook July 2018

Key Takeaways U.S. economy re-accelerating at halfway point in 2018 and most expect the expansion to continue through 2019. Given correlation between the economy and the property markets, values will continue to climb in most markets/product types as the expansion continues. Outside of retail, U.S. CRE leasing fundamentals remain solid but vacancy will inflect in 2018, mainly supply driven.

Key Takeaways CRE spreads still attractive vs. alternatives; U.S. cap rates still attractive versus global cities, which will keep capital flowing into the U.S. Inflation rearing its head in spots, driving interest rates higher, increasing volatility and causing a repricing of certain assets. Labor markets nearing full employment as the cycle matures. Job growth still healthy decelerating in spots. Expansion still has legs, but keep your eye on the yield curve.

Table of Contents The Economy Interest Rates Effects on CRE Values Trade Tensions vs. Trade War Supply/Demand Fundamentals Capital Markets

Midway through 2018, nearly nine years into the current cycle, by general consent, the U.S. economy is strong & getting stronger.

U.S. Economy Strong & Getting Stronger GDP Trends & Forecasts Latest Trends 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 3.9% Tracking the GDP Components 2018Q1 2018Q2* GDP, y/y% chg. 2.0% 3.9% Consumption 0.9% 2.7% U.S. GDP growth moderated in the first quarter of 2018 mostly due to seasonality and other measurement issues. Based on the latest economic data, growth is clearly accelerating in the second quarter trending towards 4%. 1.5% 1.0% 0.5% 0.0% 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 Real GDP, % change annualized 2018Q2F Investment 7.5% 3.3% Government Spending 1.3% -0.4% Net Exports ($bil.) -$657 -$625 With confidence high, wage growth accelerating, and with a massive tax cut stimulus package just now kicking in the economic backdrop for the property markets is strong and getting stronger. Source: *GDP Estimates for 2018Q2 from Moody s Analytics made on 7-9-2018, Cushman & Wakefield Research

Strong Correlation Between GDP Growth & CRE U.S. Real GDP vs. Demand for Office Space 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0 Correlation =.76 U.S. Real GDP (left scale) Net Absorption, MSF 49 55 48 3.0 2.7 2.3 120 100 80 60 40 20 0-20 -40-60 -80 As the economy goes, so goes CRE When the U.S. economy was growing at a rate of ~2% for most of this expansion vacancy was generally falling, rents were generally rising, and CRE values were generally soaring. That was all occurring under a 2% growing economy. What should CRE expect from a ~3% growing economy? -4.0 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019-100 Source: Bureau of Economic Analysis, Cushman & Wakefield Research

Leading Indicators in Excellent Shape 7 6 5 4 3 Leading Index Revving Back Up Confidence at 15-yr High Retail Sales Up 6% 131 127 123 119 115 May 2017 Jul 2017 Sep 2017 Nov 2017 Jan 2018 Mar 2018 May 2018 Jun 2017 Aug 2017 Oct 2017 Dec 2017 Feb 2018 Apr 2018 Jun 2018 May 2017 Jul 2017 Sep 2017 Nov 2017 Jan 2018 Mar 2018 May 2018 Composite Index, y/y %Chg. CCI Retail Sales, y/y %Chg. Manufacturing Growing Tech Sector Surging Jobless Claims 40-yr Low 62 60 58 56 > 50 = expansion 54 Jun 2017 Aug 2017 Oct 2017 Dec 2017 Feb 2018 Apr 2018 Jun 2018 ISM Index 12 10 8 6 May 2017 Jul 2017 Sep 2017 Nov 2017 Jan 2018 Mar 2018 May 2018 Jun 2017 Aug 2017 Oct 2017 Dec 2017 Feb 2018 Apr 2018 Jun 2018 270 250 230 210 Tech Pulse Index, y/y %Chg. Jobless Claims, 000's 6 5 4 3 The leading indicators that correlate well with the property markets continue to point to robust demand. The most recent economic data shows that confidence remains at a near-cyclical high, retail sales are accelerating, the manufacturing sector continues to expand, the tech sector remains robust, and jobless claims are hovering at a 40-year low. Source: Conference Board, Census Bureau, ISM, Federal Reserve, Bureau of Labor Statistics

Job Growth Momentum Tracker Total Nonfarm Employment Gains, 000 s Rank Metro Area Job Growth 2017* Job Growth 2018* 1 New York 155 123 2 Dallas 97 101 3 Los Angeles 79 88 4 Atlanta 68 46 5 Washington, DC 65 41 6 Miami 61 28 7 San Francisco 60 46 8 Phoenix 54 58 9 Seattle 54 61 10 Philadelphia 51 30 11 Boston 49 28 12 Chicago 48 27 13 Orlando 48 40 14 Riverside, CA 46 48 15 Detroit 38 19 16 Minneapolis 36 21 17 Austin 34 36 18 Nashville 34 22 19 Charlotte 33 34 20 San Diego 32 27 21 Tampa 32 33 22 Las Vegas 31 27 23 Portland, OR 28 25 24 Denver 27 36 25 San Jose -12 28 Rank Metro Area Job Growth 2017* Job Growth 2018* 26 San Antonio 24 22 27 Jacksonville 23 19 28 Columbus 23 12 29 Sacramento 18 24 30 Salt Lake City 18 19 31 Kansas City 17 16 32 St. Louis 17 10 33 Cincinnati 16 6 34 Indianapolis 15 16 35 Raleigh 15 17 36 Baltimore 14 16 37 Boise City 12 13 38 Grand Rapids 12 11 39 Provo-Orem, UT 11 10 40 Houston 10 69 41 Reno 10 10 42 Fresno 9 10 43 Virginia Beach 9 1 44 Fayetteville 9 6 45 Sarasota 9 7 46 Melbourne, FL 9 1 47 Charleston 9 5 48 Colorado Springs 9 7 49 Louisville 8 7 The strength of the U.S. economy is most clearly evident in the labor markets. A few observations: The country s largest cities continue to create a healthy number of jobs led by New York. Certain tech cities are revving back up (e.g. LA, Seattle, Austin, Denver, San Jose, Salt Lake City). With oil prices rising, Houston and other energy-producing markets are gaining momentum. 50 Cape Coral-Fort Myers 8 1 = Gaining Momentum Source: Bureau of Labor Statistics, Cushman & Wakefield Research; *Comparing job growth Jan-Apr 2017 vs. Jan-April 2018

NABE Consensus Forecast June 2018 Median 2018 Forecast 2019 Forecast Five Lowest Five Highest Median Five Lowest Real GDP, % change, Q4/Q4 2.8 2.3 3.5 2.5 1.8 3.3 CPI, % change, Q4/Q4 2.4 1.9 2.9 2.2 1.9 3.0 Personal Consumption Expenditures Price Index less food energy, % chg, Q4/Q4 Five Highest 2.1 1.7 2.9 2.1 1.6 2.7 Civilian Unemployment Rate, % annual average 3.9 3.8 4.0 3.7 3.4 4.2 Federal Funds Target, % year-end 2.21 2.13 2.39 2.88 2.38 3.38 10-Yr Treasury Note Yield, % year-end 3.20 3.01 3.59 3.50 2.72 4.40 Foreign Exchange Rate, US$ per Euro, Dec avg. 1.20 1.14 1.25 1.21 1.12 1.32 Housing Starts, millions of units 1.3 1.2 1.4 1.3 1.2 1.5 Home Prices, FHFA, % chg., Q4/Q4 5.8 3.8 7.6 4.4 2.3 6.8 Oil Prices, $ per barrel, Dec avg. 65 57 75 65 50 81 Corporate Profits After Tax, % change, annual avg. 6.3-2.5 15.0 4.8 1.9 12.4 According to the consensus, the median forecast for real GDP growth in 2018 is 2.8% and 2.5% for 2019. However, half of the survey panelists expect the next economic slowdown to occur sometime between Q4 2019 and Q2 2020 (equally important half do not). The consensus also expects the Fed to continue to normalize monetary policy with three to four rate hikes in 2018 and 2019. Long-term interest rates are also expected to rise gradually over the forecast period. Source: National Association of Business Economics, Moody s Analytics*

Tracking to Be the Longest U.S. Expansionary Cycles 2009-18 8.9 Years 2nd longest 2001-07 1991-01 1982-90 1980-81 1975-80 1970-73 1961-69 1958-60 1954-57 10 Years - Longest On May 1, 2018, this became the second longest U.S. expansion in the post WWII era and on July 2, 2019 it will officially be the longest. Although investing at later stages of the cycle is more difficult, it is worth remembering that expansions do not die of old age. With confidence high, and stimulus effects still coming, it would take a lot to derail the U.S. expansion. 1949-53 1945-48 0 2 4 6 8 10 12 Odds remain high that we are in midst of the longest U.S. expansion on record. Source: NBER, Cushman & Wakefield Research

The table is set for interest rates to rise. What does that mean for commercial real estate values?

U.S. Wage Pressures Are Forming 4.5 4 3.5 3 2.5 2 1.5 Industry 2018Q1 over 2017Q1 % Chg. Professional & Bus Services 3.1% Construction 2.7% Financial Activities 3.7% Trans & Warehousing 3.7% Retail 3.2% Health Services 2.7% All 2.9% 2.9% Longer-term interest rate movements are often driven by inflation, or inflation expectations. Wage growth is now showing signs of acceleration. In the first quarter of 2018 wages grew by 2.9% which is the strongest reading in the current cycle. The wage gains reported today are also more broad-based, occurring across most income quantiles. 1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2018Q1 ECI: Wages and salaries - Private industry - All U.S. workers Source: Bureau of Labor Statistics, Cushman & Wakefield Research

Employers Struggling to Fill Positions Percentage of Firms with Positions Not Able to Fill Right Now 40 35 30 25 20 Numerous metrics are now lining up to indicate that the labor markets are tight and that labor shortages are becoming a major challenge. This will likely create even greater upward pressure on wages going forward. 15 10 5 0 Aug 1975 Apr 1978 Dec 1980 Aug 1983 Apr 1986 Dec 1988 Aug 1991 Apr 1994 Dec 1996 Aug 1999 Apr 2002 Dec 2004 Aug 2007 Apr 2010 Dec 2012 Aug 2015 Apr 2018 Source: The Conference Board

More Jobs Than People to Fill Workers Have Leverage 18000 16000 14000 12000 Job openings are at an all-time high giving workers even more leverage. Again, more signs of wage pressures. 10000 8000 6000 4000 6.7M 6.3M 2000 0 Jan 2001 Oct 2001 Jul 2002 Apr 2003 Jan 2004 Oct 2004 Jul 2005 Apr 2006 Jan 2007 Oct 2007 Jul 2008 Apr 2009 Jan 2010 Oct 2010 Jul 2011 Apr 2012 Jan 2013 Oct 2013 Jul 2014 Apr 2015 Jan 2016 Oct 2016 Jul 2017 Apr 2018 Unemployment, 000's Job Openings, 000's Source: Bureau of Labor Statistics, Cushman & Wakefield Research

Here Comes Inflation CPI Components In addition to wage growth, and partly because of it, broader measures of inflation are also trending upwards. 2.9 2.7 2.5 2.3 2.7% 2.2% CPI Weights May 2018 y/y %chg. Food & Beverage 14.6 1.2 Housing/Rental 42.6 3.0 Apparel 3.0 1.4 The latest readings on the CPI show that inflation grew by 2.7% in May compared to one year ago. 2.1 1.9 1.7 1.5 Transportation 15.3 5.6 Medical Care 8.5 2.4 Recreation 5.7 0.2 Education & Communication 6.9 0.5 Other 3.2 2.5 Core CPI, which strips out the volatile food and energy components, is now above the Fed s target rate of 2% and is trending up. May 2017 Jun 2017 Jul 2017 Aug 2017 Sep 2017 Oct 2017 Nov 2017 CPI: All Items (y/y%) Dec 2017 Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 The Fed prefers to use the core PCE index and it grew 2% year-over-year in May. Core CPI: All items less food and energy Source: Bureau of Labor Statistics, Cushman & Wakefield Research

Inflation Perking Up Globally Consumer Price Index, Y/Y % Change Americas Europe APAC Country 2017 2018E Trend Country 2017 2018E Trend Country 2017 2018E Trend Low inflation/interest rates globally have been an important dynamic in keeping interest rates low in the U.S. United States 1.3 2.9 Canada 1.4 1.6 Mexico 2.8 6.0 Eurozone 1.5 1.8 France 1.0 1.9 Germany 1.7 2.0 Japan 0.5 1.1 China 1.5 2.4 India 3.3 5.2 That is also changing. Inflationary pressures are beginning to perk up globally. Latin America 11.9 6.3 U.K. 2.7 2.6 Australia 1.9 2.4 Greece 1.1 1.4 Hong Kong 1.5 2.6 Ireland 0.3 1.0 Indonesia 3.8 3.5 Italy 1.2 1.3 Philippines 2.9 4.5 Netherlands 1.4 1.7 Singapore 0.6 0.6 Norway 1.9 2.1 South Korea 1.9 1.7 Poland 2.0 2.3 Vietnam 3.5 3.9 Portugal 1.4 1.2 Spain 2.0 1.8 Source: Oxford Economics, Cushman & Wakefield Research

Early Sign of Tariff Impact on Inflation Laundry Equipment 10 5 0-5 -10 20% U.S. tariffs on washing machines take effect on 1/22 8.5% Though it s too early to conclude, it is likely that tariffs will also create additional price pressures. We note that since the 20% tariffs went into effect on washing machines, the cost of laundry equipment made a strong move upwards in May. Spot prices on steel and aluminum have also been trending up since April 2018 (when the tariffs took effect). -15 Jan 2013 May 2013 Sep 2013 Jan 2014 May 2014 Sep 2014 Jan 2015 May 2015 Sep 2015 Jan 2016 May 2016 Sep 2016 Jan 2017 May 2017 Sep 2017 Jan 2018 May 2018 CPI: Laundry equipment, Y/Y %chg. Source: Bureau of Labor Statistics, Cushman & Wakefield Research

The Fed Will Respond % 8.0 7.0 6.0 2016 2017 2018 2019 2020 With the U.S. economy either at or near full employment, and with wage pressures and other inflationary pressures forming, the Fed will likely respond by taking the fed funds rate on a steeper upward trajectory. 5.0 4.0 3.0 2.0 Fed Funds Rate 0.4 1.0 1.9 3.4 3.7 Most assumed three rate hikes for 2018; now most assume four. 1.0 0.0 2000Q1 2002Q1 2004Q1 2006Q1 2008Q1 2010Q1 2012Q1 2014Q1 2016Q1 2018Q1 2020Q1 Libor 3- Month 0.7 1.3 2.3 3.7 3.9 LIBOR Rates: 3-Month Federal Funds Rate Source: Moody s Analytics, Cushman & Wakefield Research

10-Year Rate Begins Move Upwards Latest Trends 3.2 3.0 2.8 2.6 2.4 2.2 Forecasts Moody s Analytics Oxford Economics Cushman & Wakefield 2016 2017 2018 2019 1.84 2.33 3.15 3.91 1.84 2.33 2.94 3.30 1.84 2.33 2.98 3.38 NABE 1.84 2.33 3.20 3.50 The long end of the curve has also demonstrated some inflation-driven pressure. The 10-year Treasury yield rose from 2.3% in December of 2017 to ~3.0% in May of 2018. The 10-year has settled back down as of late but most expect it to rise gradually from this point forward. 2.0 08 Sep 2017 29 Sep 2017 20 Oct 2017 10 Nov 2017 01 Dec 2017 22 Dec 2017 12 Jan 2018 02 Feb 2018 23 Feb 2018 16 Mar 2018 10-Yr Treasury Yield 06 Apr 2018 27 Apr 2018 18 May 2018 08 Jun 2018 Philly Fed Survey 1.84 2.33 3.00 3.40 Average 1.84 2.33 3.03 3.40 Changes to nontraditional domestic and global monetary policy may put additional upward pressure on longerterm bond yields over the coming years. Source: Federal Reserve, Cushman & Wakefield Research

Globally, Moving Higher 10-year Government Bond Rates 9.0% 8.0% Again, the global pressures that have helped keep U.S. interest rates low are fading. 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 0.1% 0.1% 0.6% 0.9% 1.5% 1.6% 2.3% 2.3% 2.5% 2.8% 2.9% 2.9% 3.8% Since the beginning of 2018, interest rates have also inched up across most of Europe and Asia. -1.0% 2017 2018F Historical Average Source: Oxford Economics, Bloomberg, Cushman & Wakefield Research *Average 1990 2017; forecasts updated 6-14-2018

What s the Impact of Rising Rates on CRE Values? It s Nuanced The temptation is to assume that if interest rates rise then commercial real estate values must fall because of the trusted equation. Values = NOI/Cap Rate The reality is that it creates a mix of headwinds and tailwinds for property values. The primary headwind is that it increases the cost of capital while the primary tailwind is that it boosts operating revenue. History tells us, more often than not, the positives to NOI growth more than offset the negatives from higher interest rates. Core assets with long-term leases in place have less upside and are more highly correlated to interest rate movements and are therefore more exposed. A rising Libor will also create pressure on certain assets. Value-add assets typically benefit the most as higher interest rates signal better lease-up. Future rent growth is the key. Investors should look to overweight portfolios in markets where demand story will prevail.

Stronger Growth = Higher CRE Values 5 4 20 15 CRE values, in the aggregate, are more highly correlated with GDP growth than they are interest rate movements. 3 2 1 10 5 0 Over the last 15 years the U.S. economy has experienced a wide array of interest rate environments. The 10-year Treasury yield has ranged from 1.8% (2012) to 4.8% (2006). 0-1 -2 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-5 -10-15 Regardless of where the 10- year Treasury yield stood, if GDP was growing so were CRE values. -3-4 10-Yr Treasury Yield 4.6% 4.0% 4.3% 4.3% 4.8% 4.6% 3.7% 3.3% 3.2% 2.8% 1.8% 2.4% 2.5% 2.1% 1.8% 2.3% 3.0% GDP (left scale) National All-Property Price Index -20-25 Source: Real Capital Analytics, Cushman & Wakefield Research forecast using GDP as a proxy to forecast property prices for 2018 and 2019

Yield Curve Keep Your Eye On It 10-Year Treasury Constant Maturity Minus 3-Month Yield 5 4 3 2 1 0-1 -2-3 -4 Jan 1977 Jan 1984 Jan 1991 Historical Average = 163 bps Jan 1998 Jan 2005 Jan 2012 June 2018 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 An inverted yield curve occurs when the short end of the curve is higher than the long end, and that typically signals a recession is coming 6 to 24 months later. The yield curve has flattened out in recent weeks but still remains reasonably close to its historical average. An inverted yield curve does not guarantee a recession; however, there has only been one false positive, making it the single most reliable leading indicator. Keep an eye on it Recession Yield Curve Source: Federal Reserve, Cushman & Wakefield Research

Lets not confuse trade tensions with trade wars.

Episodes of Protectionism 1790 America should propose tariffs to protect its infant industries Alexander Hamilton 1890 McKinley Tariff to aid steel producers 1922 Fordney-McCumber tariff to help American farmers President Donald Trump is not the first leader to advocate for tariffs and other protectionist policies. Trade negotiations and debates are not new and rarely do they escalate into a fullblown trade wars. 1981 Japan agrees to voluntary export restraints on car shipments 1750 1800 1850 1900 1950 2000 1789 I use no porter or cheese in my family, but such as is made in America. George Washington 1828 Tariffs on wool products 1895 Thank God I am not a free trader - Theodore Roosevelt 2018 Trade wars are good, and easy to win - President Donald Trump

Tariff Timeline January 23, 2017 May 18, 2017 President Trump withdraws the U.S. from Trans-Pacific Partnership. Trump administration seeks to renegotiate the North American Free Trade Agreement; negotiations ongoing. January 22, 2018 March/April 2018 Trump administration approves tariffs on imported steel and aluminum; Canada and Mexico exempted. China imposes tariffs of 15-25% on 128 products that account for US $3b, including pork, cherries, and scrap metal. Trump proposed introducing tariffs of up to 25% on 1,300 Chinese goods, primarily high-tech; representing $50 billion in goods. China s Ministry of Commerce announced plans to target $50b in U.S. goods per year. China plans to put a 25% tariff on imported U.S. soybeans, cars, aircraft. Trump hints at $150 billion of new tariffs on Chinese goods. President Trump approves tariffs on imported washing machines & solar panels. Today Negotiating but still with rather large differences.

U.S. Trade Deficit U.S. Trade Deficit as a % of GDP Top 5 U.S. Trading Deficits 2017 0% -1% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 1. China: $375b deficit 2. Mexico: $71b deficit One of Trump s key campaign promises was to challenge trade agreements, particularly those with which the U.S. runs a large trade deficit. Hence the focus on China as well as Mexico and Canada. -2% NAFTA 3. Japan: $69b deficit -3% -4% -5% China enters WTO 4. Germany: $65b deficit 5. Canada: $18b deficit -6% Source: U.S. Census Bureau, Cushman & Wakefield Research

U.S. & China Are Economically Linked U.S. Buys From China $600 China Buys From the U.S. Major Foreign Holders of U.S. Treasuries The U.S. and China have very strong economic ties so there is an inherent incentive to compromise. $500 Holdings ($tril.) % of total $400 $300 $200 $100 U.S. Imports From China, billions China $1.162 18.6% Japan $1.066 17.0% Ireland $0.328 5.2% Brazil $0.266 4.2% Switzerland $0.251 4.0% $0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E All $6.260 Source: U.S. Department of Trade, Federal Reserve, Cushman & Wakefield Research

Probability of Trade War Very Low 70% 60% 50% 40% Impact U.S. tariffs and global retaliation Inflation & currency wars Major supply chain disruptions Global economy tips into recession Impact U.S. increases tariffs but little response from trading partners Economy suffers some from higher import prices & inflation Global GDP is only slightly impacted Global Expansion Continues 65% A full-blown trade war poses a significant downside risk to the CRE outlook, but the odds of a trade war occurring are still low. 30% 20% Nearly every sector of the economy impacted, including CRE 25% 10% 10% 0% Trade War Trade Skirmish Compromise Probabilities Source: Moody s Analytics, Cushman & Wakefield Research

Supply/Demand Fundamentals

Where Are We in the Leasing Cycle? Office Apartment Industrial All real estate is intensely local, but to summarize Industrial & multifamily continue to boom with demand showing no signs of letting up. Office demand remains healthy but is weighed down by the density trend. Vacancy is beginning to inflect as supply comes online. Retail Hotel Retail remains under secular stress but well-located experiential space continues to thrive. Downturn Weak demand Vacancy rising Rents resetting Source: Cushman & Wakefield Research Recovery Improving demand Vacancy stabilizing/falling Rents stabilizing Upturn Healthy demand Vacancy stable Construction picking Rents growing Mature Slowing demand Vacancy rising Construction peaking Rents decelerating Hotel is feeling the pinch of overbuilding; however, independent hotels and budget hotels are outperforming full service.

U.S. Office Sector Dynamics Net Absorption, msf 120 80 40 0-40 -80-120 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Demand moderating 2020 Vacancy Rate 20% 16% 12% 8% 4% 2000 2002 2004 2006 2008 2010 2012 2014 2016 Vacancy bottomed out in 2016 & trending up 2018 2020 The U.S. economy is experiencing strong growth and demand for office space is still percolating. But supply has pretty much caught up. Office space deliveries are projected to peak in 2018 at approximately 68 msf. New Completions, msf 140 120 100 80 60 40 20 0 2000 2002 2004 2006 2008 2010 Supply growth peaking in 2018 2012 2014 2016 2018 2020 Asking Rents 15% 10% 5% 0% -5% -10% 2000 2002 2004 2006 2008 2010 2012 2014 2016 Rent growth set to decelerate 2018 2020 As supply outstrips demand it will lead to a modest upturn in vacancy rates across the nation. Asking rents, while still rising, are likely to climb more slowly over the next few years. Source: Cushman & Wakefield Research

Office Net Absorption Q1 2018 Top 50 Office Markets Ranked by Net Absorption U.S. = 8.1 msf Rank Market sf 000 s 1 San Francisco, CA 2,249 2 Seattle, WA 1,357 3 New York - Midtown 970 4 Phoenix, AZ 849 5 San Jose, CA 841 6 Boston, MA 655 7 Cleveland, OH 652 8 Dallas/Fort Worth, TX 500 9 Charleston, SC 486 10 Atlanta, GA 470 11 DC Metro 461 12 Colorado Springs 419 13 Kansas City, MO 391 14 San Diego, CA 350 15 Sacramento, CA 341 16 Northern VA 332 17 New York Midtown South 289 18 New York - Brooklyn 225 19 Philadelphia, PA 220 20 Hampton Roads, VA 218 21 Milwaukee, WI 207 22 San Mateo County, CA 204 23 El Paso, TX 201 24 Raleigh/Durham NC 189 25 Miami, FL 182 Source: Cushman & Wakefield Research Rank Market sf 000 s 26 DC Proper 176 27 Las Vegas, NV 173 28 Salt Lake City, UT 150 29 Charlotte, NC 120 30 Buffalo, NY 118 31 Ft. Lauderdale, FL 103 32 Chicago, IL 70 33 Hartford, CT 66 34 Greenville, SC 64 35 Columbus, OH 63 36 Denver, CO 56 37 St. Louis, MO 56 38 Orange County CA 53 39 Nashville, TN 53 40 Inland Empire CA 53 41 St. Petersburg/Clearwater, FL 47 42 Tucson, AZ 45 43 Fredericksburg, VA 34 44 Dayton, OH 27 45 Indianapolis, IN 21 46 Austin, TX 20 47 Tampa, FL 19 48 Binghamton, NY 8 49 Providence, RI 7 50 Jacksonville, FL 1 U.S. office net absorption +13% in Q1 2018 compared to a year-ago

U.S. Office Market Q1 2018 Vacancy NY Midtown South San Francisco, CA Charlotte NY - Downtown NY - Midtown Boston San Jose Oakland Philadelphia Washington, DC San Diego Baltimore LA metro Atlanta Denver Phoenix Chicago Dallas Northern NJ Houston Avg. Q1 2017 (13.2%) Avg. Q1 2018 (13.3%) Markets with the lowest vacancy in the nation are almost all techdriven and vacancy in these markets continues to decline. Of the 87 markets tracked in Q1 2018, vacancy fell in 52 markets and increased in 35 when compared to a year-ago. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Q1 2017 Q1 2018 Source: Cushman & Wakefield Research *Chart visual from FTI Consulting

Who s Hot, Who s Not Office Asking Rents, Q1 2018 over Q1 2017, Yr/Yr% 25% 20% 15% 10% 5% 0% -5% 21% Hot: Top 10 Not: Top 10 18% 10% 10% 9% 7% 7% 7% 6% 6% 2% -3% -3% -3% -3% -4% -5% -5% -5% -5% In total, 67 of 87 office markets tracked by Cushman & Wakefield saw rents increase in Q1 2018. The strongest gains were observed in mostly secondary cities. The markets that saw substantial declines in rental rates included several in the midst of a construction surge like Boston and Brooklyn. -10% -9% -15% Source: Cushman & Wakefield Research

Top 10 Office Construction Markets As of Q1 2018 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% U.S. Average: 1.9% New construction is ramping up but still remains well below (~35%) levels observed in the late 1990s. For the most part these are markets experiencing strong space demand and should be able to digest the new supply without significant disruption. But this trend bears watching. U/C as % of Inv Source: Cushman & Wakefield Research

Concessions on the Rise Q1 2018 National Trend Overall All Markets $38 $37 $36 $35 $34 $33 $32 $31 $30 $29 2016 2017 Q1 2018 National Average TI's Sample of Metros: Non-renewal Class A 2017 Market Avg. TI s* Avg. Free Rent (months) Washington, DC $113 15 NY Midtown $104 9 NY Downtown $89 7 San Francisco $80 4 No Virginia $69 9 Chicago $57 5 NJ $45 6 Sacramento $45 5 *TI s based on sample of 5-15 year deals Nationally, landlord concessions are increasing as owners meet the competition from new office buildings by offering more generous terms. Tenant improvements (TI s) increased overall by nearly 11% during Q1 2018. Washington, DC is offering the highest concessions for class A space in the U.S. Source: Cushman & Wakefield Research

Coworking Across the Country As of Q1 2018 Manhattan Los Angeles San Francisco Chicago Miami/Dade Washington, DC Boston Dallas-Fort Worth San Diego Atlanta Seattle Minneapolis St. Louis Philadelphia Long Island Denver Orange County Northern VA Houston NY - Brooklyn New Jersey Phoenix Shared Workspace, sf 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 Perhaps no trend in this cycle is bigger and more controversial than the rapid growth in coworking space occupancy. Coworking continues to expand rapidly across most major U.S. cities. Midtown, Midtown South, and Downtown NYC combined possess the most amount of coworking space in the U.S. by a significant amount. Source: Cushman & Wakefield Research

U.S. Industrial Sector Dynamics As of Q1 2018 Net Absorption, msf 300 150 0-150 2000 2002 2004 2006 2008 2010 Robust demand continues 2012 2014 2016 2018 2020 Vacancy Rate 12% 10% 8% 6% 4% 2000 2002 2004 2006 2008 2010 2012 2014 2016 Vacancy to inch up but remains tight 2018 2020 We expect the record-setting industrial run to continue, with net absorption tallying over 400 msf for the next two years. Despite an active development pipeline, which is expected to peak in 2018, vacancy rates are not expected to rise by much. New Completions, msf 300 200 100 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Supply finally keeping pace 2020 Asking Rents 8% 6% 4% 2% 0% -2% -4% -6% -8% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Slower rent growth 2020 Developers will continue exercising caution, with deliveries modestly outpacing demand, thus allowing vacancy rates to hover in the 5% range through 2020. Growth in asking rents is expected to soften but rents will continue to rise. Source: Cushman & Wakefield Research

Top 10 Industrial Construction Markets As of Q1 2018 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% U.S. Average: 0.8% New construction starts rose by 3.6% nationally in Q1 2018 with 42 markets reporting development levels rising during the quarter. Currently, there is 251.3 msf of industrial product under construction of which 164.1 msf is speculative. On a square foot basis, five primary markets Inland Empire, Dallas, PA I-81/I-78 Corridor, Atlanta, and Central Valley CA account for over one-third of the development pipeline, although 47 markets have more than 1 msf under development. U/C as % of Inv Source: Cushman & Wakefield Research

Industrial Net Absorption Q1 2018 Top 50 Industrial Markets Ranked by Net Absorption U.S. = 251.2 msf Rank Market msf 1 Inland Empire CA 25.6 2 Dallas/Ft. Worth, TX 20.2 3 PA I-81/I-78 Corridor 17.3 4 Atlanta, GA 16.5 5 Central Valley CA 9.2 6 Chicago, IL 7.5 7 Central New Jersey 7.4 8 Columbus, OH 7.0 9 Houston, TX 6.5 10 St. Louis, MO 6.3 11 Baltimore, MD 6.2 12 Indianapolis, IN 5.8 13 Louisville, KY 5.6 14 Phoenix, AZ 4.9 15 Denver, CO 4.6 16 Detroit, MI 4.5 17 Nashville, TN 4.5 18 Seattle, WA 4.3 19 Los Angeles, CA 4.2 20 Kansas City, MO 3.7 21 Salt Lake City, UT 3.6 22 Philadelphia, PA 3.6 23 Miami, FL 3.6 24 Portland, OR 3.5 25 Cincinnati, OH 3.3 Source: Cushman & Wakefield Research Rank Market msf 26 San Diego, CA 3.3 27 Boston, MA 3.1 28 Charlotte, NC 3.0 29 Oakland/East Bay, CA 2.9 30 Greenville, SC 2.5 31 Las Vegas, NV 2.5 32 Orlando, FL 1.6 33 San Antonio, TX 1.6 34 Ft. Lauderdale, FL 1.5 35 Orange County, CA 1.5 36 Austin, TX 1.4 37 Hartford, CT 1.3 38 Northern New Jersey 1.2 39 Minneapolis, MN 1.2 40 Jacksonville, FL 1.2 41 Tampa, FL 1.1 42 Dayton, OH 1.0 43 Sacramento, CA 0.9 44 New Haven, CT 0.9 45 Puget Sound - Eastside 0.7 46 Lakeland, FL 0.7 47 San Jose, CA 0.6 48 Suburban MD 0.5 49 San Francisco North Bay, CA 0.4 50 Northern VA 0.4 U.S. industrial net absorption +15% in Q1 2018 compared to a year-ago. U.S. industrial markets absorbed 56.9 msf in Q1 2018, making it the fourth strongest start to a year of the past 30 years; only the record-setting 2016 and prior cycle highs of 2007 and 1999 were stronger. Demand is expected to remain strong throughout 2018, with the quarterly net absorption forecast to average 58.1 msf. For perspective, that is higher than the 56.4 msf of quarterly net absorption averaged over the past seven years.

U.S. Industrial Market Q1 2018 Vacancy Los Angeles San Francisco Peninsula Orange County, CA San Jose Central New Jersey Detroit, MI Palm Beach County, FL Oakland/East Bay Salt Lake City Philadelphia Nashville Jacksonville Seattle Cincinnati St. Petersburg/Clearwater Ft. Lauderdale Inland Empire CA Central Valley CA Portland, OR Miami Source: Cushman & Wakefield Research *Chart visual from FTI Consulting 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Q1 2017 Q1 2018 Avg. Q1 2018 (5.0%) Avg. Q1 2017 (5.3%) The U.S. industrial market continued to tighten in Q1 2018 with vacancy rates falling in twothirds of the country. At 5.0%, the U.S. overall vacancy rate is a full 330 basis points below the 10-year historical average of 8.4% for all industrial types. Space options are particularly tight in the 100,000-to-250,000- square-foot size segment where new supply has lagged, and leasing demand has recently spiked. The amount of available logistics space and its functionality will remain a key storyline in 2018: 61.2% of vacant logistics space is more than 20 years old. That presents limited options for tenants seeking modern fulfillment space.

Who s Hot, Who s Not Industrial Asking Rents, Q1 2018 over Q1 2017, Yr/Yr% 25% 20% 15% 22% Hot: Top 10 Not: Top 10 19% 18% 17% 14% 13% 13% 13% 12% 11% U.S. industrial rents increased in 59 of 79 markets tracked by Cushman & Wakefield in Q1 2018, with 19 markets reporting double-digit yearover-year gains. 10% 5% 0% -5% -10% 5% -1% -1% -2% -3% -3% -3% -4% -4% -5% -7% Although overall industrial rents currently stand at a record high of $5.99 per square foot, on an inflation-adjusted basis they remain 4.9% below the level at the height of the last cycle, indicating that there is further room for industrial rents to run. Source: Cushman & Wakefield Research

U.S. Apartment Sector Dynamics As of Q1 2018 Net Absorption, Units 000 s 250 200 150 Demand slows after multiple record years Vacancy Rate 8% 6% Vacancy inching up but still lower than previous cycle Although demand for apartment units is expected to slow from record levels, it will remain significantly higher than the height of the previous cycle. 100 50 0-50 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 4% 2% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 The building boom peaks in 2018. Given still-strong demographics, it is possible the industry will be underbuilding as we near the next decade. New Completions, Units 000 s 300 200 Building boom slows after 2018 Effective Rents 8% 6% 4% Decelerating as vacancy rises Vacancy is expected to inch up but remain lower than the previous cycle. 100 2% 0% 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020-2% -4% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Reis, Cushman & Wakefield Research

U.S. Apartment Market Q1 2018 Vacancy Sacramento Central New Jersey Detroit San Bernardino/Riverside Las Vegas San Diego Long Island Los Angeles Oakland-East Bay Minneapolis Orange County Philadelphia Northern New Jersey Baltimore Richmond Colorado Springs Suburban Maryland Dayton San Jose Cincinnati Avg. Q1 2017 (4.3%) Avg. Q1 2018 (4.7%) Apartment vacancy rates are generally rising across the board but still remain below 5% in virtually every market tracked. A declining construction pipeline coupled with strong demand driven mostly by millennials in their prime renting ages will help keep vacancy in check. 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% Q1 2017 Q1 2018 Source: Cushman & Wakefield Research *Chart visual from FTI Consulting

Top 10 Apartment Construction Markets As of Q1 2018 6.0% Yes, lots of construction, but also, lots of demand. 5.0% 4.0% It is no coincidence that the cities shown on this chart are also mostly millennial hots spots. 3.0% U.S. Average: 2.5% 2.0% Completions 2018 as % of Inv Source: Reis, Cushman & Wakefield Research

U.S. Retail Sector Dynamics As of Q1 2018 Net Absorption, msf 40 20 Demand very weak Vacancy Rate 12% 10% While many retail categories are in contraction mode and some iconic retailers are facing major challenges, not all categories are shrinking. 0-20 -40 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 8% 6% 4% 2000 2002 2004 2006 2008 Vacancy will remain elevated for years, maybe forever 2010 2012 2014 2016 2018 2020 Dollar stores, discounters, offprice apparel concepts are aggressively growing. Food related retail also remains in expansion mode, but growth is slowing. New Completions, msf 40 30 20 10 Supply adjusting to weaker demand Effective Rents 6% 4% 2% 0% -2% Weak and decelerating These trends have equated to tepid demand and an extremely bifurcated marketplace where Class A projects are accounting for nearly all of the nation s occupancy growth. 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020-4% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Reis, Cushman & Wakefield Research

Capital Markets

Fundraising for CRE Remains Spectacular Dry Powder Targeted at Real Estate Globally ($ bn) $300 $250 $200 $150 $100 Rest of the world Asia Europe North America Tremendous capital in the system with fundraising at an all-time record high as of June 2018; an increasing weight focused on opportunistic and debt strategies. 63% of the global capital is being raised to target real estate assets in North America. The record level of dry powder also reflects the increasing difficulty in deploying funds. $50 $0 2012 2013 2014 2015 2016 2017 Jun 2018 Source: Preqin, Cushman & Wakefield Research

U.S. Sales Market Active Sales Volume, All Product Types 700 600 By Product Type *2018 YTD The capital markets remain very active so far this year with sales volumes on par with last year s level. 500 400 300 200 100 0-10% -5% -1% Apartment +3% Office-CBD -22% Office-Suburbs -6% Industrial +25% Retail -28% Hotel +70% Senior Housing -29% Land -0.3% *Jan-Apr 2018 over Jan-April 2017, % That said, it does appear that 2015 was the peak year in the cycle as sales activity has been slowly coming down since then. Lack of inventory to buy is the primary reason for the deceleration as many assets have already traded multiple times in the current cycle. Sales Volume, $bil. Source: Real Capital Analytics, Cushman & Wakefield Research

Pricing Trends by Product Type RCA CPPI Price Indices 180.00 160.00 140.00 120.00 100.00 80.00 60.00 Market April 2018 over April 2017 (y/y%) Apartment +23% Industrial +11% Officesuburban +5% Office-CBD -1% Retail +1% All +8% Despite the uptick in interest rates, pricing is holding extremely well. CRE values increased 8% overall in April compared to a year-ago. The gains are being driven by double-digit growth in both multifamily and industrial. CBD office pricing has turned down recently which we dig into on the next slide. 40.00 Apr 2002 Aug 2003 Dec 2004 Apr 2006 Aug 2007 Dec 2008 Apr 2010 Aug 2011 Dec 2012 Apr 2014 Aug 2015 Dec 2016 Apr 2018 Apartment Industrial Office-Suburban Retail Office-CBD Source: Real Capital Analytics, Cushman & Wakefield Research

Pricing Trends CBD Office RCA CPPI CBD Price Indices Tier 1 Cities 2018Q1, y/y% 2017Q1, y/y% Trend Manhattan -1% 5% Slowing SF Metro 12% 11% Accelerating Boston 6% 16% Slowing DC Metro 9% -6% Accelerating Chicago 6% 5% Accelerating LA Metro 5% 10% Slowing Average 6% 7% Slowing Tier 2 Cities Atlanta 13.6% 10.9% Accelerating Seattle 11.4% 2.5% Accelerating Dallas 3.6% 6.3% Slowing Philadelphia 4.7% 4.4% Accelerating Denver 4.0% 1.1% Accelerating Miami 3.1% -2.6% Accelerating Average 6.7% 3.8% Accelerating Tier 3 Cities Minneapolis 4.2% 5.2% Slowing Charlotte -6.1% 9.2% Slowing Houston -2.8% -4.1% Improving Sacramento 2.1% 2.5% Slowing Raleigh/Durham 12.2% 8.3% Accelerating Nashville 6.8% 3.7% Accelerating Average 2.7% 4.1% Slowing The recent declines in CBD office prices nationally are driven by just a few markets, Manhattan in particular. The slight price decline in Manhattan in Q1 is mostly due to a wave of new office product hitting the market which has caused rents to soften. Given that NY leads the country in job creation, this softness will likely be short-lived. We continue to observe very healthy price appreciation across most CBDs. San Francisco, Atlanta, Seattle, and Raleigh/Durham all experienced double-digit gains. Source: Cushman & Wakefield Research

Cross-border Capital Flows US, Billions $250 $200 Chinese capital controls go into effect Cross-border capital flows into commercial real estate continue to be extremely robust. $150 $100 Europe Asia +8% +46% That said, it has cooled off somewhat in the U.S. from record levels, and capital is now flowing more aggressively into Europe and Asia Pacific. $50 $0 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 U.S. Mar-17 Sep-17 Mar-18-25% In particular, Chinese capital into the U.S. has slowed sharply since the Chinese government implemented capital controls. U.S. All Property Types Cross-Border Volume ($) Europe All Property Types Cross-Border Volume ($) Asia All Property Types Cross-Border Volume ($) Source: Real Capital Analytics, Cushman & Wakefield Research

Still a Lot of Foreign Capital Targeting U.S. 100 $b Global Continental 25% Foreign capital accounted for 11% of all U.S. transactions in in the first quarter of 2018. 90 80 70 % of total US transaction volume 20% This level is down from the peak of 17% registered in Q3 2016, but still above the historical average range of 7%. 60 15% 50 40 10% 30 20 5% 10 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 0% Source: Real Capital Analytics, Cushman & Wakefield Research

Top Countries Buying U.S. CRE Total Share by Cross-boarder Investor Country 2016 2017 Q1'18* Country # Props % of Total Vol Volume ($m) YOY Chg 2 1 1 Canada 665 32.5% 1 3 2 China 765 14.3% 5 2 3 Singapore 125 12.4% 3 4 4 Germany 63 8.2% 20 5 5 Netherlands 61 5.7% 11 8 6 Hong Kong 60 4.1% 4 6 7 South Korea 17 3.3% 9 7 8 Japan 28 2.6% 6 10 9 Sw itzerland 64 2.0% 16 11 10 Norw ay 3 1.9% 8 13 11 United Kingdom 35 1.7% 10 9 12 Israel 35 1.5% 18 12 13 Australia 12 1.4% 13 15 14 France 7 1.2% 15 16 15 Spain 8 1.2% 17 18 16 United Arab Emirates 27 1.1% 7 14 17 Qatar 5 1.1% 14 21 18 Kuw ait 6 0.7% 19 19 19 Sw eden 14 0.6% 30 20 20 Finland 7 0.5% 21 22 21 Chile 5 0.5% 25 24 22 Mexico 6 0.3% 33 26 23 Ireland 5 0.3% 28 27 24 India 6 0.2% 12 25 25 Saudi Arabia 2 0.2% 20,302.5 8,931.1 7,707.9 5,125.2 3,536.0 2,558.2 2,051.5 1,609.0 1,258.9 1,155.3 1,071.2 949.4 881.1 755.3 737.3 676.0 664.0 428.7 363.1 310.2 291.9 204.5 180.5 128.5 110.5-94% 27% -48% 31% -12% -6% -52% -57% -58% 75% -55% -68% -50% -8% -65% -56% 24% 80% 61% 0% With China pulling back, others are stepping it up. In particular, Canadian capital is flowing aggressively into the U.S., up 27%. Singaporean capital, which set a record in 2017, up again this year. Dutch and Norwegian investment into the U.S. also surging. Source: Real Capital Analytics, Cushman & Wakefield Research, *Past 4 Quarters

Cross-border Capital Flows into U.S. What the Foreign Capital Is Buying Q1 2018 Q1 2017 Office is still the preferred asset class, accounting for 45% of all foreign capital transactions. Apartment 26.1% Hotel 11.2% Retail 7.3% Land 3.9% Industrial 18.1% Office 44.5% Office Industrial Retail Apartment Hotel Other (niche) Hotel 24.0% Apartment 16.7% Retail 9.6% Land 6.0% Industrial 8.1% Office 59.5% Office Industrial Retail Apartment Hotel Other (niche) But increasingly we are seeing foreign capital target the industrial sector, accounting for 18.1% of foreign transactions in Q1 2018 vs. 8.1% a yearago. Niche sectors such as student housing, senior housing, medical office, and data centers are also gaining market share. Source: Real Capital Analytics, Cushman & Wakefield Research

U.S. Still Relatively Attractive Prime Office Cap Rates (%) 12% 10% 8% 6% 4% 2% 0% Max* Min* 18Q1 (current) Average (*max/min/avg refer to 2007-2017) Relative to global cities, U.S. markets still offer higher returns. For prime office assets cap rates in Europe range 3-4%, in Asia they range 2-4.5%s all much lower then cap rates for U.S. gateway cities (4-6.5%) and much lower than U.S. secondary markets (5-8%). A strengthening U.S. dollar along with spreads over 10- year gov t bonds are offsetting factors for certain investors, but on net foreign capital continues to flow aggressively into the U.S. Europe APAC United States Source: Real Capital Analytics, Altus Insite Investment Trends Survey, Cushman & Wakefield Research

NINE YEARS & STILL GOING STRONG U.S. Economic & Commercial Real Estate Outlook Kevin Thorpe Chief Economist, Global Head of Research kevin.thorpe@cushwake.com 2018 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.