www.colliersnashville.com

MARKET REPORTNASHVILLE

2nd Quarter Continues to Improve and Shows Potential for Growth

The Nashville office market is continuing to show a steady recovery from the recent economic recession. The population is growing, employment is rising and companies are expanding. The city is still maintaining its reputation as a desirable place to live and relocate business. Thumbtack.com recently named Nashville as the fifth best city to start a new business and Policom ranked Nashville as having the fourth strongest economy in the country.

The Cool Springs/Franklin submarket echoes this economic strength with over 223,000 square feet of office space currently under construction. Boyle Investment Company is completing a new office development located at 5000 and 5005 Meridian Boulevard. These buildings are expected to be completed by July 31st, and the first tenants will be moving in by August 1 of this year. Carothers Park II will also be adding 28,000 square feet of space to the market by the end of the year. New office developments like these will be a welcome addition to the market as the vacancy rate continues to remain tight at 6.1%.

Downtown Nashville is showing a lot of strength with a positive absorption of 82,839 square feet this quarter. The area welcomes technology protection company Asurion into the Ragland Building with 92,000 square feet. Additionally, law firm Pillsbury Winthrop Shaw Pittman inked a deal for 44,000 square feet in the AT&T Tower. Deals such as these and the continuing construction on the 1.2 million square foot convention center, the

2Q 2012 | OFFICE

Nashville Office MarketSummary of Statistics, Q2 2012

Vacancy Rate: 8.2%

YTD Absorption: 498,035 SF

Under Construction: 299,500 SF

Asking Rents Per Square Feet:Class A: $21.91Class B: $17.60Class C: $14.88Overall Rental Rates: $18.82

Downtown Class A: $21.77Suburban Class A: $22.64

Quarterly Comparisons and Totals

QUARTER BLDGSTOTAL

INVENTORY SF

DIRECT VACANT

DIRECT VACANCY

RATE

SUBLEASE VACANCY

RATE

NET ABSORPTION

CURRENT QTR

NET ABSORPTION

YTD SF

UNDER CONSTRUCTION

SF

AVG ASKING RATE

Q2.12* 612 47,544,666 3,985,071 8.2% 0.8% 112,127 498,035 299,500 $18.82

Q1.12 608 47,372,913 4,039,462 8.5% 0.8% 346,137 386,009 333,496 $18.69

Q4.11 608 47,372,913 4,385,599 9.3% 0.9% 279,607 301,424 333,496 $18.78

Q3.11 607 47,237,913 4,530,206 9.6% 1.0% 342,157 297,972 320,820 $18.82

Q2.11 605 47,111,313 4,745,763 10.1% 0.9% (56,141) (64,084) 267,832 $18.84

MARKET INDICATORS2Q

2012

Forecast

2012

VACANCY

NET ABSORPTION

CONSTRUCTION

ASKING RATE

$18

$19

$20

$21

$22

$23Overall Class A

2012

2011

2010

2009

2008

2Q 2012 | Average Rental Rates

MARKET REPORT | Q2 2012 | OFFICE | NASHVILLE

www.colliersnashville.com

800-room Omni Headquarters Hotel and further planning of the Nashville Medical Mart are all indicators that the downtown market is gaining strength. “The ‘SoBro’ and ‘Gulch’ areas of Nashville are showing an incredible amount of activity,” states Colliers International Managing Partner Nate Greene. “It’s almost frenzied, with new projects rapidly developing in areas that were previously ignored.” New projects like the Trolley Barns and the Ragland Building are the first examples of redeveloping previously existing space to accommodate the growth in this pocket of Nashville.

The recent announcement of the State’s

possible move to consolidate and relocate government agencies into state-owned buildings looms over the positive growth in the downtown and metrocenter submarkets. This move could create huge blocks of vacant space in both submarkets which could potentially drive down rental rates and stall the momentum in growth the markets are currently experiencing.

It could be several more months before a decision is made on this matter. “Until then, I expect the Nashville market to continue its steady recovery from the recession,” says Nate Greene. “I feel positive that Nashville will hold its place a great place for businesses and people to relocate. Nashville is only going to grow.”

Class A Class B Class C

2Q 2012 | Vacancy Space By Type

Class A 1,272,829 SF

Class B 2,090,517 SF

Class C 621,725 SF

-20000

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2Q 2012 | Net Absorption By Submarket

RECENT SALES TRANSACTIONSSALES ACTIVITY

PROPERTY BUYER SALE PRICE SIZE SF SUBMARKET

The McEwen Building KBS Real Estate Investment Trust III $40,000,000 175,262 Cool Springs/Franklin

5201 Virginia Way Tennessee Hospital Association Inc. $4,695,000 42,492 Brentwood

5380 Hickory Hollow Parkway Freeland Chevrolet, LLC $2,250,000 41,000 Airport South

213 3rd Avenue North Gary Bowie & Melody Anne Malloy $825,000 12,412 Downtown

RECENT LEASING TRANSACTIONSLEASING ACTIVITY

PROPERTY TENANT SIZE SF TYPE SUBMARKET

The Ragland Building Asurion 92,000 New Downtown

AT&T Tower Pillsbury Winthrop Shaw Pittman 44,000 Sublease Downtown

5301 Virginia Way Associate Pathologists 28,804 Expansion Brentwood

12 Cadillac Drive The Rehab Documentation Center 11,466 New Brentwood44 Vantage Way Maximus, Inc. 11,134 New MetroCenter

DEFINITIONS

Colliers Inventory - Our market set of data is pulled from CoStar Group and includes all single and multi tenant office buildings above 20,000 SF. Buildings that are for educational, governmental or medical use have been removed from the data set.

Absorption - The net change in occupied space between the current quarter and the previous quarter, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy.

Class A Building - Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.

Class B Building - Buildings competing for a wide range of users with average rents. Building finishes are fair to good for the area and systems are adequate but the building does not compete with Class A at the same price.

Class C Building - Buildings competing for tenants requiring functional space at rents below the average for the area.

Vacancy Rate - Percentage rate of the total amount of physically vacant space divided by the total amount of existing inventory.

*Bold text denotes Colliers International Nashville transactions.

MARKET REPORT | Q2 2012 | OFFICE | NASHVILLE

www.colliersnashville.com

HIGHLIGHTS FROM THE QUARTER• Kelsey Morgan was welcomed to our

office as the new Director of Research in June. Kelsey previously worked with Cassidy Turley in Nashville as a broker assistant.

• Nate Greene, Bert Mathews, Terry E. Smith and Tony Vaughn were honored as Commercial Real Estate Power Leaders by the Nashville Business Journal.

• Shane Douglas was announced as a nominee for the Nashville Chamber of Commerce’s annual Emerging Leaders survey. Shane was the only commercial real estate broker to receive this honor this year.

• Nashville was named as having the fourth strongest economy in the United States by Policom.

• Thumbtack.com ranked Nashville as the fifth best city to start a business.

• Forbes named Nashville as the seventh “Best City for Finding Employment Right Now,” the number 10 best city for tech jobs and the number nine “Best Big City for Jobs.”

• Nashville continues to have a significantly lower unemployment rate than the country overall when the United States government released the national unemployment rate at 8.2%. Nashville boasts an unemployment rate of 6.8%

• Kiplinger named Nashville number one of its list of eight US metropolitan areas that are “poised to become job-creating machines in the years ahead.”

UPDATE Market Comparisons

OFFICE MARKET

SUBMARKET BLDGS TOTALINVENTORY

SF

DIRECTVACANT

SF

DIRECTVACANCY

RATE

SUBLEASEVACANCY

RATE

VACANCY RATE PRIOR

QTR

NET ABSORPTIONCURRENT QTR

NET ABSORPTION

YTDUNDER

CONSTRUCTION

AVG ASKING RATE

AIRPORT NORTH 58 4,865,420 364,546 7.5% 0.7% 9.1% 105,452 91,653 0 $17.93

AIRPORT SOUTH 75 4,095,582 449,418 11.0% 0.6% 16.3% 79,856 107,887 0 $14.54

BRENTWOOD 84 5,824,592 347,428 6.0% 0.2% 5.4% 10,681 18,384 4,500 $21.48

COOL SPRINGS/FRANKLIN 95 7,325,155 427,002 5.8% 0.4% 6.1% 57,021 251,577 223,000 $21.13

DOWNTOWN 92 11,407,979 1,468,120 12.9% 2.0% 18.6% 82,839 198,997 20,000 $18.50

GREEN HILLS/MUSIC ROW 60 3,065,468 178,707 5.8% 0.4% 6.4% 8,808 (10,844) 0 $20.91

METROCENTER 27 2,459,538 277,562 11.0% 0.0% 7.6% 64,109 90,849 0 $16.84

RIVERGATE/NORTH 46 2,195,752 102,925 4.7% 0.1% 14.0% (1,335) (1,656) 0 $16.35

WEST END/BELLE MEADE 68 6,060,850 269,144 4.4% 0.3% 6.4% 36,013 57,211 52,000 $22.59

CLASS

A 115 18,296,686 1,272,829 7.0% 1.6% 7.0% 158,270 376,771 184,500 $21.91

B 341 21,183,063 2,090,517 9.8% 0.3% 12.8% (25,445) 131,185 115,000 $17.60

C 156 7,993,550 621,725 7.8% 0.5% 18.6% (20,698) (9,921) 0 $14.88

TOTAL 612 47,544,666 3,985,071 8.2% 0.8% 10.5% 112,127 498,035 299,500 $18.42

MARKET REPORT | Q2 2012 | OFFICE | NASHVILLE

www.colliersnashville.com

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Richard Fulton, CCIMDIR +1 615 850 2719

Vice President

Nate Greene, CCIMDIR +1 615 850 2729Managing Partner &

President

Bert MathewsDIR +1 615 850 2701Partner & President

Chris Grear, CCIMDIR +1 615 850 2702

Vice President

John Gifford, CCIMDIR +1 615 850 2713

Senior Associate

Shane Douglas, CCIMDIR +1 615 850 2734

Associate

Lee ParadiseDIR +1 615 850 2717

Vice President

Vickie SaitoDIR +1 615 850 2711

Senior Associate

UNITED STATES:

NashvilleNate GreeneManaging Partner & President300 BroadwayNashville, TN, 37201TEL +1 615 850 2729FAX +1 615 850 3229

Kelsey MorganDirector of Research300 BroadwayNashville, TN, 37201TEL +1 615 850 2758FAX +1 615 244 3258

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• $1.8 billion in annual revenue• 1.25 billion square feet under management

• 12,300 professionals

Copyright © Colliers International

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it.

Accelerating success.

ABOUT COLLIERS INTERNATIONAL – NASHVILLE

Collier International Nashville is one of the largest full service commercial real estate firms in the region. Its brokers provide a myriad of services to owners and tenants with a commitment to excellence that has won them the respect of local, national and international clients for many years. With more than 25 employees, the firm serves clients ranging from Fortune 500 corporations, major banks and insurance companies to investors, private institutions and small businesses.

Chad PoffDIR +1 615 850 2707

Associate

Charlotte Ford, CCIMDIR +1 615 850 2751

Senior Associate

Bill NeillDIR +1 615 850 2742

Vice President

Mark WoolwineDIR +1 615 850 2732

Vice President

1. Hendersonville2. Downtown3. MetroCenter4. West End5. Green Hills/Music Row6. Airport North7. Airport South8. Brentwood9. Cool Springs/Franklin

Allison SchepmanDirector of Marketing300 BroadwayNashville, TN, 37201TEL +1 615 850 2748FAX +1 615 244 3248