Puget Sound Market Overview September 2019

Presented to

Cosmos Development Company

PUGET SOUND

OFFICE MARKET
OVERVIEW

Q2 2019

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Regional Overview

Seattle

Seattle CBD vacancy 5.6%
Average Downtown rental rates increased by 3.4% in Q2 to $44.78 (FS)
Downtown Seattle has 4.8M SF of office space under construction
89% of new construction delivering by the end of the year is pre-leased
Seattle CBD class A average asking rents jumped to $51.42 (FS) in Q2, up 2.1%

compared with the previous quarter

NOTABLE TRANSACTIONS

unnamed Fourth & Madison 2+U Alexandria
tech firm
169,949 SF 120,886 SF 109,969 SF
333 Dexter

613,245 SF

505 Union Station World Trade Center East Fourth & Madison Financial Center

60,000 SF 54,961 SF 49,232 SF 34,671 SF

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Eastside

Bellevue CBD vacancy 3.3%

Average Eastside asking rents increased by 4.4% in Q2 to $43.19 (FS)

Bellevue CBD market will remain tight for the next 24 months at minimum. Class

A vacancy is 2.6% with tenant requirements approaching 4M SF and no

construction currently underway

Eastside vacancy dropped 80 basis points compared with Q1, down to 5.5%

Amazon’s $195M purchase of the Bellevue Corporate Plaza site and lease of the

proposed 714,000 SF Binary Towers confirm their commitment to a massive

expansion in the Bellevue CBD

NOTABLE TRANSACTIONS

Binary Towers The Spring District 90 North Highlands Park
Block 16 Building 1, 3 & 4 Tech Campus
714,000 SF
337,996 SF 162,861 SF 61,094 SF

Bothell, WA One Twelfth @ Twelfth 3830 Monte Villa Pkwy Lincoln Executive
Center B
43,509 SF 43,509 SF 29,015 SF
23,368 SF

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Seattle Submarkets

Submarket Inventory Under Absorbed This Absorbed Vacancy
Construction
Quarter YTD 14.5%
0 SF 5.4%
Queen Anne/ 4,241,458 SF -98,020 SF -213,394 SF 5.6%
Magnolia 5,114,853 SF 0 SF 2.6%
113,777 SF 84,025 SF 5.7%
Belltown/Denny
Regrade

Seattle CBD 30,113,823 SF 1,838,902 SF 784,667 SF 939,536 SF

Pioneer Square/ 6,270,440 SF 0 SF 29,023 SF 49,245 SF
Waterfront

Lake Union 8,978,077 SF 4,306,011 SF 5,151 SF 36,593 SF

Ballard/U-District 2,875,089 SF 313,750 SF 9,899 SF -29,666 SF 4.3%
0 SF -20,222 SF -13,879 SF 6.3%
Capitol Hill/ 1,749,883 SF 0 SF 58,967 SF 42,993 SF 5.9%
Central District

South Seattle 2,627,636 SF

TOTAL/AVERAGE 61,971,259 SF 6,458,663 SF 883,242 SF 895,453 SF 6.29 %

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Ballard/
U-District

Queen Anne/
Magnolia

Full Service Lake
Asking Rent Union
$41.83
$40.51 Belltown/ Seattle Capitol Hill/
$48.43 Denny CBD Central District
$39.90 Regrade
$44.71
$43.14 Pioneer
$41.76 Square
$33.15
South Seattle
$41.68

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Rent & Vacancy Trend CLASSASEATTLECBDHIS

Class A Rents

$55.00

$50.00 12.6% 11.5% 11.8% 11.2% 12.0%
12.3% 11.6% 11.4% 11.2% 10.7%
11.4%
$45.00 10.9% 10.5%

$40.00

$35.00

$30.00
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016

Class A Rents

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STORICAL RENT AND VACANCY

Class A Vacancy

14.0%

12.9% 13.0%

12.5% 11.8% 12.0%

11.0%

% 9.2% 10.1% 10.0%
9.5% 9.7% 8.0%
9.3%
8.4%

7.8%

6.0%
4.8%

4.0%

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
6 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019

Class A Vacancy

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Pacific Northwest vs Bay Area TE

Seattle Eastside

1,258,055 SF 947,489 SGFoogle

13,294,769 SF 3,922,45A8mSaFzon

0 SF 16,635,M69ic5roSsFoft

809,961 SF 0 SF Apple unnamed
tech firm

132,000 SF 100,563 SF Cisco

946,303 SF 465,578FaScFebook

372,000 SF 15,818 SF Oracle

345,999 SF Sal2e4s3fo,1rc2e7/STFableau

160,511 SF 1,025,810OScFulus

125,000 SF 0 SF Uber

164,961 SF 0 SF Adobe

0 SF 73,680 SF Ebay

165,000 SF 0 SF Dropbox

65,000 SF 0 SF Twitter

Dell

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ECH TENANT OCCUPANCY San Francisco/
Silicon Valley
Footprint in Seattle
20,170,723 SF
2,949,481 SF
837,000 SF
14,400,000 SF
7,605,292 SF
5,433,000 SF
3,406,088 SF
2,180,349 SF
767,000 SF
1,697,984 SF
1,637,304 SF
1,352,200 SF
837,114 SF
697,000 SF

Footprint in San Francisico/Silicon Valley











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IZE DEMAND OCCUPANCY PIPELINE

F TENANTS TOTAL SF 2,500,000 2,199,000
2,000,000
6 1,950,000
7 930,000 1,500,000 1,072,500
10 635,000 1,000,000 982,000
24 768,000
40 619,000 500,000 350,000 380,000
18 131,500
TBD
Y DEMAND 0 2020 2021 50,000 2023
2019
SF 2022

3,087,500 TENANTS Seattle Tenants in the Market
784,000
351,000 66 DEMAND BY INDUSTRY
334,000 13
140,000 5 12% 2% 12% Architecture, Engineering &
3 18% ArchiCteocntsutrruec,tEionngineering &
3
44% Construction
OTAL AVERAGE 12%
Business, Consulting, Financial,
33,500 47,938 BusinIensfos,rmCoatniosun,ltIinnsgu,raFnincaen&ciLaelg, al
SF SF InformCoawtioornk,inIngsurance & Legal

Coworking

HEdeualctaEHhtdeciuaoaclrnteah,tcGi&oaonrLev,iefG&eronLSvmiecferieenSnnmctci,eeennstc,es
Tech Tech

OtherOsthers

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Boren Office Lofts
135,830 SF

Delivey Q1 2021

15th & Market Block 38 W Lakefront Blocks 1165 Eastlake
149,015 SF 322,127 SF 624,000 SF 100,086 SF
Delivery Q2 2021
Delivery Q4 2019 Delivery Q4 2019 Deliver Q1 2021

N 701 Dexter 400 Westlake 188 Blaine 1150 Eastlake Onni SLU 5
217,000 SF 200,000 204,941 SF 303,119 SF 940,160 SF Deli
Delivered Q2 2019 Delivery Q3 2022
Delivery Q4 2022 Delivery Q1 2021 Delivery Q1 2023

333 Dexter 901 Harrison Yale & Harrison Ra
613,245 SF 220,000 SF 200,000 SF 7
Delivery Q3 2019 Delivery TBD Delivery TBD
Deli
Thomas & Dexter
199,000 SF
Delivery TBD

Dexter Yard 3rd & Lenora
495,879 SF 307,616 SF
Delivery Q4 2021 Delivery Q3 2020

Arbor Blocks 111 Westlake
388,911 SF 434,000 SF
Delivered Q2 2019 Delivery TBD

401 Queen Anne
155,000 SF

Delivery Q3 2022

9,761,264 SF 4,846,221 SF 3,685,213 SF

Total Development Pipeline Total Under Construction Total Preleased

Recently Delivered Under Construction Proposed
9

Updated through Q2 2019

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Development Pipeline

WSCC
526,254 SF
ivery Q2 2023

ainier Square
722,416 SF
ivery Q3 2020

The Net
807,580 SF
Delivery Q1 2023

Federal Reserve S Phase I
Bldg 714,500 SF
Delivery Q3 2023
180,000 SF
Delivery Q4 2020 S Phase II
547,600 SF
2+U Delivery Q4 2023
685,000 SF
Delivery Q3 2019 The Jack
146,184 SF
800 Alaskan Delivery Q3 2021
222,000 SF
Delivery Q3 2023

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Development Timeline

Leased (Single Tenant) Leased (Multiple Tenants)
Unleased Under Construction Proposed Developments

Project 2+U (For Sublease)
Size 685,000 SF
SF Rainier Square
333 Dexter 722,416 SF
900K
(unnamed tech Lakefront
800K company) Blocks
624,000 SF
700K 613,245 SF

600K

500K Arbor Blocks
400K 388,911 SF

3rd & Lenora Block 38 W
307,616 SF 322,127 SF

300K 188 Blaine 15th & Federal 400
200K Market Reserve Westlake
(Life Science) 202,000 SF 180,000 SF 200,000 SF

204,941 SF

1165 Eastlake Boren Lofts The Jack
135,830 SF 146,000
(Life Science)
100K
100,086 SF

0 2019 2020 2021

10 2,718,097 SF 1,210,032 SF 1,399,922 SF

Est

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9.7M SF 4.8M SF 3.6M SF 76%
TOTAL PIPELINE UNDER PRE-LEASED
(2019-2023) CONSTRUCTION U/C PRE-LEASED

Onni SLU The Net
940,160 SF 807,580 SF

S Phase I
714,500 SF

WSCC S Phase II
526,254 SF 547,600 SF

Dexter Yard
495,879 SF

111 Westlake
434,000 SF

1150 Yale & Harrison
Eastlake 200,000 SF
303,119 SF
Thomas & Dexter
701 Dexter 800 Alaskan 901 Harrison 199,000 SF
217,000 SF 222,000 SF 220,000 SF

k 401 Queen Anne
0 SF 155,000 SF

2022 2023 TBD

1,312,160 SF 3,121,053 SF 1,053,000 SF

timated Delivery Date Updated through Q2 2019

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Eastside Submarkets

Submarket Inventory Under Absorbed This Absorbed Vacant Ove
Ask
Kirkland Construction Quarter YTD
520 Corridor
Bellevue CBD 2,360,258 SF 198,070 SF 89,805 SF 100,097 SF 8.5% $52
Mercer Island
Bothell 2,807,471 SF 0 SF 3,488 SF 37,459 SF 8.2% $42
Redmond
Suburban 9,839,521 SF 377,000 SF 127,653 SF 257,143 SF 3.3% $51
Bellevue
I-90 Corridor 575,995 SF 0 SF -10,879 SF -156,778 SF 15.2% $39
Total/Average
3,312,732 SF 0 SF 5,079 SF 222,339 SF 7.1% $36

3,365,858 SF 0 SF 23,563 SF 46,538 SF 4.7% $37

3,602,485 SF 751,233 SF 6,988 SF 21,502 SF 5.3% $39

4,566,856 SF 0 SF 4,537 SF -12,289 SF 7.2% $31

30,431,176 SF 1,326,303 SF 250,234 SF 516,011 SF 7.4% $41

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Bothell

erall Avg. Gross Kirkland Redmond
king Rent
2.37 Bellevue 520
2.83 CBD Corridor
1.82
9.43 Suburban
6.67 Bellevue
7.93
9.14 I-90
1.38 Corridor
1.45

Mercer
Island

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Eastside Tech Companies

BELLEVUE

KIRKLAND
BOTHELL

12

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520 CORRIDOR
I-90 CORRIDOR

REDMOND













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Development Timeline

Leased Pending Commitment
Unleased Under Construction Unleased

Project Size Bellevue
SF Phase 1
1,006,00
1,400K

1,200K

B
7

1,000K

800K Spring District Binary Towers
600K REI HQ 715,000 SF
400K 370,000 SF
200K Kirkland Urban Spring District
Central Block 24
200,000 SF 167,000 SF

Spring District Summit III
Block 16 377,000 SF
329,000 SF

Kirkland Urban Kirkland Esterra Park
North Urban South Phase I
203,000 SF 220,000 SF 235,000 SF

0 2019 2020 2021 2022

16 402,000 SF 699,000 SF 544,000 SF 950,000 SF

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6.9M SF 2.6M SF 4.6M SF 90%
UNDER
TOTAL PIPELINE CONSTRUCTION PRE-LEASED U/C PRE-LEASED
(2019-2023) & PENDING

10855 Bellevue
Towers
1,500,000 SF

e 600
1
00 SF

555 108th Bellevue 600
865,000 SF Phase 2
1,006,000 SF
Bellevue Plaza
725,000 SF

Onni 106th Bellevue Way &
896,000 SF Main St
723,000 SF
108th & 8th Rosehill Campus
500,000 SF Fana Four 639,000 SF
400,000 SF
Lincoln Executive
Center
600,000 SF

Spring District Burstead
Block 6 Phase II
350,000 SF 400,000 SF

201 106th
160,000 SF

2023 TBD

4,802,000 SF 5,889,750 SF

Estimated Delivery Date Updated through Q2 2019

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Largest Employers

70K
60K
50K
40K
30K
20K
10K

0 The Boeing Joint Base Amazon Microsoft Navy University of Providence
Company Lewis- Region NW Washington Health & Svcs
Number of (military) A
Employees McChord
(military)

FORTUNE 500 COMPANIES HEA

*Source: Puget Sound Busi

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Safeway & Walmart Costco Multicare Fred Meyer King County Starbucks Swedish
Alberstons Medical

ADQUARTERED IN KING COUNTY

iness Journal Book of Lists

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Growing Tech Companies

Footprint (SF) 11,280,177 13,397,746 14,426,829 16,635,695
18M
45% 19% 8% 15%
14M increase increase increase increase

10M 5,722,154 7,760,922

6M 72% 36%
3,319,083 increase increase

2M

1986-1995 1996-2000 2001-2005 2006-2009 2010-2013 2014-2018 Future

Footprint (SF) 14,743,797
14M

10M 8,722,101 10,445,905 41%
increase
26% 19%
6M 6,872,589 increase increase
56%
3,031,499 3,563,762 4,401,919
23% increase
2M 1,069,786 183% 17%
increase increase 2015
increase
2013 2014
18 2011 2012 2016 2017 2018
+Future

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Footprint (SF) 223%
2,500K increase

2,000K 2,184,723

1,500K

1,000K 219% 77% 67% 18%
increase increase increase increase
200K 60,071 191,929 340,421 570,421 676,132
2007
2008 2009-2012 2013-2016 2017 2018
+Future

Footprint (SF) 153%
1,300K increase
1,411,881
900K 274% 38% 160%
increase increase increase
1,186,321
403,684
500K 144% 59% 132% 557,392 158%
increase increase increase increase

67,845 108,000 176,609 455,073
2014 76,192 2016
100K 2015
Oculus
27,845 Facebook 2017 2018
2013 +Future

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Local Economy

Summary Expan sion Late Ex pansion

The Puget Sound has long been known ECONOMIC CYCLE
as a technology hub and if non-tech STATUS
industries here being to struggle, that Rece
reputation can only grow. The region very
will lean in even further to embrace the ssion Reco
tech giants and create a supportive
environment for tech startups. The
Puget Sound will ride out the near term
pains of a slow down in global trade and
manufacturing, becoming ever more a
future-thinking region.

Total Employment & Unemployment Rate Economic

2,000,000 6.0% 12.0% Personal In
1,800,000 10.0%
8.0% 2014 2016
1,600,000 5.0% 6.0%
4.0%
1,400,000 4.0% 2.0%
1,200,000 0.0%

1,000,000 3.0% 2012
800,000 2.0%
600,000

400,000 1.0%

200,000
0 0.0%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

19

Source: Moody’s Analytics

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Economic Drivers

Logistics Manufacturing High Tech

The escalation of a trade dispute Boeing’s 787 being grounded is a The advantage the Puget Sound
between the U.S. and China poses red flag for the future of aerospace region holds with trade tensions
a threat to the region’s exporters, manufacturing in the Puget Sound. dampening imports and exports is
especially Boeing, China being their Productions cuts resulting from the being a booming tech hub and the
2nd largest market for planes. In set back will effect Boeing’s bottom birthplace of cloud computing. The
general less freight traffic is sending line and that could lead the company tech industry will keep the region’s
economy stable through a changing
ripples into the job market and to shift workers to other states.
business across the region. landscape.

Indicators Housing Costs

ncome Growth (FHFA House Price Index)

2018 2020 2022 2024 500

450

400

350

300

250

200

150

100

50

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

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Seattle’s Population Growth

% change Population 1
since 2010 increase
since 2010 3

1 SEATTLE 18.7% 114,412 #1SEATTLE IS
144,252
2 AUSTIN 17.9% 101,403 FOR GROWTH THIS
125,599 DECADE
3 DENVER 16.8% 120,535
62,483 Since 2010, Seattle’s
4 FORT WORTH 16.8% 63,441 population has increased by
88,932
5 CHARLOTTE 16.3% 58,421 18.7%, the fastest growth
178,533 rate among the 50 largest
6 MIAMI 15.6%
U.S. cities.
7 ATLANTA 15.0%

8 WASHINGTON D.C. 14.7%

9 RALEIGH 14.4%

10 SAN ANTONIO 13.4% 10

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Population 3.8 M

Thanks to the surging
technology sector, Seattle’s

population growth since
2010 is nearly twice the

national average.

Job Growth 2.6%
Seattle’s job growth
rate is 90 basis points
higher than the national
8 average

4 9 Average West Coast
5 Apartment Rents Q1 2019
2 7
10 Seattle: $2,510
6 Bellevue: $2,743
Portland: $1,876
San Francisco: $4,393
Los Angeles: $2,957

National:
$1,474

Avg. Metro Home Price $507,155 Source: Rider Levett Bucknall
Median Seattle Home Price $673,836
Median Eastside Home Price $730,581

2018 Average National
Home Price

$310,149











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BOSTON

14

CHICAGO NEW YORK

27 27

WA DC

23

R

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Development Boom

Amazon’s many
projects which account

for close to 2M SF of

office space currently
under construction with

plans for more in the
future

$4.25B State Renovation
of Key Arena
Route 99 Alaskan Way
which will bring NHL
viaduct redevelopment hockey to Seattle
project. Four-lane, 2-mile in 2020

underground tunnel running Seattle $1.7

underneath the city of Washingto
Convention
Seattle, completed in
expans
2019 $688M

redevelopment of
the Seattle waterfront
which will include 20 acres

of new public space, improved

vehicle connections to surrounding

neighborhoods, and the

replacement and renovation

of the seawall along the

waterfront

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The Spring
District in Bellevue is

a $2.3B transit-oriented

development and neighborhood
which is home the Global Innovation

Exchange campus, a graduate
research institute collaboration among
UW and Tsinghua University in Beijing.
Launched in September 2017 thanks

to a $40M donation from Microsoft,
the GIX will keep Seattle on

the innovative edge for
years to come

Redmond

7B Renovation/ Microsoft’s multi-
expansion of T-Mobile billion dollar
on State headquarters, extensive
n Center redevelopment of
sion remodel of their six-building
headquarters in Bellevue their Redmond campus

Bellevue which will add 18 new
buildings and create
room for 8,000 new

employees

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NKF’s Global Reach

ONE OF THE WORLD’S LEADING

16,000 500M

PROFESSIONALS SQUARE FEET MANAGED

U.S. EUROPE

5,442 people 3,531 people
147 offices 173 offices
19 countries
AMERICAS*
AFRICA
714 people
28 offices 680 people
12 countries 24 offices
10 countries
Includes Knight Frank and Independently owned offices
* Excludes the U.S.

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NKF’S GLOBAL REACH

G REAL ESTATE SERVICE FIRMS

430 $2.5B

OFFICES INTERNATIONALLY REVENUE

ASIA
PACIFIC

5,700 people
60 offices
14 countries

MIDDLE
EAST

53 people
3 offices
2 countries