Mapping the

for corporate real estate and Charlotte

January 2019

2

Agenda

Building the Future of Work 1

Market Observations and Outlook 2

Market Drivers: Fintech 3

Charlotte

Fourth Industrial Revolution:

technology-driven disruption

Future of work and the

human experience

Macro-environment

a complex macro landscape

Stock market near all-time highs

18-year high consumer confidence

Synchronized global growthYield curve flattening

Amazon’s $15 minimum wage

Unemployment dips to 3.9%

$80+/barrel oil

Trade wars

Brexit inching closer

Emerging market risks

Rising debt and deficit

Navigating

game changers

Blockchain Internet of

Things

Virtual and

Augmented

Reality

Ecommerce

and Online

Marketplaces

Sharing

Economy /

Coworking

Autonomous

Vehicles

Artificial

Intelligence

Future of work model

Human ExperienceEnhance user experience

through engagement,

empowerment and fulfillment.

Digital DriveHarness digitization and rich data to

enhance people and enterprise

performance.

Continuous InnovationCombine new thinking, solutions and

processes to drive value creation and

accelerate transformation.

Operational

ExcellenceOptimize enterprise resources and

service delivery to increase productivity,

mitigate risks and ensure high

performance.

Financial PerformanceManage spending to enable growth and

enhance return on investment (ROI).

JLL (2017)

Future of Work – Where ambition thrives www.futureofwork.jll

Powered By Human Experience

Feeling trusted by the

management team

Being able to reply on a kind

management team

will drive change

Trust, above all, has the largest impact on people:

Being encouraged to take initiative

is the new happiness

Top five ingredients to create a unique experience:

Happiness Recognition Personal learning

and development

InspirationCreativity

40% of the respondents feel very engaged at work:

40

11

1

48

% Yes, very engaged

% Yes, somewhat engaged

% Not, engaged

% Cannot say

must come first

Top 3 enjoyed spaces

1. Coworking spaces

2. Telecentres

3. Spaces for shared community interests

1. Spaces for health and well-being

2. Community spaces

3. Spaces for small children

Top 3 desired spaces

Case Study: Optimist Hall

What’s going on:

• Disruption and uncertainty

• People, technology and workplace

• Data and advanced analytics

• People at the core of the workplace

• Workplace as a service

• Operational and financial performance

What you can do about it:

• Elevate the dialogue

• Inspire executive management to take action

• Stretch your thinking to develop a future-state vision

• Expand the scope of corporate real estate

• Change the landscape

11

Market Snapshot

Source: JLL Research Charlotte

66%

34%

Class A Class B

Total Vacancy 13.4%

Submarket Inventory Average Asking

Rent Total Vacancy Under Construction

CBD 21,544,854 $33.29 12.0% 2,514,079

Suburban 29,458,380 $25.40 14.6% 823,891

Total 51,003,234 $28.79 13.5% 3,337,970

Class A Rents $30.88

Class B Rents $23.11

12

Employment growth: Charlotte MSA

Source: JLL Research, EMSI Charlotte

3.2%

Unemployment Rate

2010-2018 Employment Growth

28.5%

2019-2024 Forecast Employment Growth

8.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

500,000

600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

Employment Unemployment Rate

13Source: JLL Research, QCEW

Charlotte employment and unemployment

32,000 jobs were added over the past 12 months, while unemployment levels closed at near record-

level lows, causing a talent crunch across the region

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

-80.0

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

Un

em

plo

ym

en

t ra

te (

%)

12

-mo

nth

ne

t ch

an

ge

(th

ou

sa

nd

s) Annual employment change

Unemployment Rate 32,000 jobs

3.2%

unemployment

14Source: JLL Research, U.S. Bureau of Labor Statistics

Charlotte MSA vs. U.S. employment change

The Charlotte economy has grown increasingly diversified since the Great Recession, outpacing

the U.S. unemployment rate in 2018.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Une

mp

loym

en

t R

ate

Charlotte MSA U.S.

3.9%

3.2%

15Source: JLL Research, U.S. Bureau of Labor Statistics

Charlotte employment vs. occupancy

Occupancy gains across the region have been more consistent over the past 12 months as the

technology sector expands

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

12

-mo

nth

% c

ha

nge

Charlotte region employment change Charlotte region occupancy change

2.9%

2.6%

16

Key suburban markets healthy

New product is driving up rental rates while vacancies remain stable

Source: JLL Research Charlotte

$3

4.8

4

$3

3.1

0

$3

3.2

9

$2

2.7

9

$1

5.8

7

$3

2.1

4

$2

4.2

3

$2

8.2

7

$1

7.2

7

$3

1.6

7

$2

2.4

0

$2

5.4

0

$2

8.7

9

6.6%

12.9%

12.0%

16.5%

18.7%

12.9%

13.9%

11.3%

14.6%

13.3%

17.9%

14.6%

13.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

Tota

l V

acancy R

ate

Overa

ll A

skin

g R

ate

Asking Rate Q3 2018 Total Vacancy Rate Q3 2018

17

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Le

asin

g a

ctivity s

.f.

Charlotte region, total leasing (s.f.)

Source: JLL Research

Leasing activity through Q3 is on pace to be about 5% lower than overall 2017 levels

18

Rental rates

Class A asking rents experienced a slight uptick in Q4, while Class B remains stable.

Source: JLL Research

$21.50

$23.79 $23.80

$22.03$22.50

$22.96 $23.06

$25.63$26.49

$29.29

$30.88

$16.23 $16.01 $16.00 $16.14

$17.37 $17.19 $17.57

$18.79 $19.03

$21.46

$23.11

$12.00

$17.00

$22.00

$27.00

$32.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018

Class A Class B

Charlotte

19

Direct average asking rents

Source: JLL Research

Rents continue to climb, reaching $28.70 in the fourth quarter of 2018.

Charlotte

$19.81$20.40

$19.88

$18.84

$20.16 $20.24$20.86

$22.36

$24.03

$26.77

$28.79

$15.0

$17.0

$19.0

$21.0

$23.0

$25.0

$27.0

$29.0

$31.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018

$ p

er

squ

are

fo

ot (f

ull

se

rvic

e)

20

Strong construction pipeline

The Charlotte market has 3.3 million square feet currently under development

Source: JLL Research

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018

Urban Suburban

Charlotte

21

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Squ

are

fe

et

Net absorption New deliveries

Net absorption and new deliveries

Net absorption slowed in Q4 to 386,321, bringing the YTD total to 4480,566 square feet.

Source: JLL Research Charlotte

22

12.1%

15.6%

17.8%

16.9% 16.8%

17.5%

14.5%

13.2%

11.9%11.5%

13.8%

6%

8%

10%

12%

14%

16%

18%

20%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018

To

tal va

ca

ncy

Total vacancy

Source: JLL Research

A tightening market has developers keen on going vertical. As a result, Class B owners are

enhancing their properties, delivering product that is prime for increased tenant activity.

Charlotte

23Source: JLL Research

Charlotte flexible space

Since 2010, Charlotte has added 625,844 square feet of flexible office space, with WeWork, Spaces

and Serendipity Labs increasing their footprint. 11

0,3

30

11

3,3

30

11

8,3

30

13

0,3

30

13

0,3

30

22

0,3

30

30

2,3

30

32

9,3

30

55

2,1

75

77

6,2

25

85

0,0

00

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Fle

xib

le s

pa

ce

(s.f

.)

Charlotte

24Source: JLL Research

CBD: Construction Activity

Charlotte

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Charlotte SanFrancisco

Atlanta Houston Nashville Oakland Denver Boston Minneapolis Austin Portland Dallas

Compared to other CBD’s, Charlotte is the fifth largest concentration of new construction in the

United States, far outpacing our peer markets.

25Source: JLL Research

CBD: Construction as a Percent of Inventory

Charlotte

North Carolina is home to two of the top five markets in terms of construction as a percent of

inventory in the central business district.

4.1%

4.2%

4.2%

4.2%

4.6%

4.8%

5.3%

6.7%

6.9%

9.7%

10.9%

11.5%

12.2%

13.7%

14.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Silicon Valley (Downtown San Jose)

Denver

San Francisco

Chicago

Columbus

Washington DC

Houston

New York (Midtown)

Seattle-Downtown

San Antonio

Charlotte

Austin

Nashville

Oakland

Raleigh/Durham

26Source: JLL Research

CBD: Rental and Vacancy Rates

Charlotte

$24.48 $24.52 $24.65

$25.72 $25.95

$29.46

$30.71

$32.97 $33.90

$18.62 $18.70

$19.98 $20.71

$21.15

$22.84 $23.54

$26.28

$28.43

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018

Tota

l V

acancy

Renta

l R

ate

Class A Rents Class B Rents Total Vacancy

Since 2010 Class A rental rates have risen to $33.91, while Class B rates have reached $27.75

Market Driver: FinTech

28

Employment and Gross Domestic Product (Charlotte)

Eleven occupations, experienced growth of 53 percent from 2012-2018, reaching over

42,300, GDP Increased by 28 percent during this period

Source: JLL Research, Bureau of Labor Statistics, Bureau of Economic Analysis, EMSI 2018

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2012 2013 2014 2015 2016 2017 2018

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

YO

Y P

erc

ent

Change G

DP

(C

harlotte)

IT E

mplo

yment

IT Employment Change in GDP

29

How big is the IT Services industry?

From 2010-2017 IT Services grew from a $2.1 Billion industry to $3.9 Billion or 83% in

the Charlotte Region.

Source: JLL Research, Bureau of Labor Statistics, Bureau of Economic Analysis, EMSI 2018

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2010 2011 2012 2013 2014 2015 2016 2017

Mill

ions

Data Processing, Hosting, and Related Services Custom Computer Programming Services

Computer Systems Design Services Computer Facilities Management Services

Other Computer Related Services Computer Training

30

Employment Growth

Across the board employment growth, Software Developers, Applications grew by 82%,

followed by Information Security Analysts at 81%

Source: JLL Research, Bureau of Labor Statistics, Bureau of Economic Analysis, EMSI 2018 Charlotte

0 2,000 4,000 6,000 8,000 10,000 12,000

Database Administrators

Web Developers

Computer Network Support Specialists

Computer Network Architects

Information Security Analysts

Computer Programmers

Software Developers, Systems Software

Network and Computer Systems Administrators

Computer User Support Specialists

Software Developers, Applications

Computer Systems Analysts

2018 2012

31

Location Quotient: Employment

LQ measures the relative concentration of an industry when compared to a base region,

Charlotte has 2.6X the Information Security Analysts when compared to the US

Source: JLL Research, Bureau of Labor Statistics, Bureau of Economic Analysis, EMSI 2018

0.9

1.0

1.1

1.2

1.2

1.2

1.2

1.2

1.3

2.1

2.6

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Computer Network Support Specialists

Software Developers, Systems Software

Network and Computer Systems Administrators

Database Administrators

Web Developers

Computer Network Architects

Computer Programmers

Software Developers, Applications

Computer User Support Specialists

Computer Systems Analysts

Information Security Analysts

Charlotte

32

Information Technology: Wages

Peer Regions: Range $125,351 to $88,313

Source: JLL Research, Bureau of Labor Statistics, EMSI 2018

$125,351

$120,837

$104,808

$101,304

$92,519

$89,441 $89,350 $88,313

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

San Jose San Francisco New York Boston Dallas Atlanta Chicago Charlotte

Charlotte

33

Office Observations

Rents continue to rise in growing market

• Rental rates continue to climb in Midtown/South End, with Class A average asking rates reaching $34.84 per square foot.

• There is 3.2 million square feet of new construction in the market, 2.5 million is concentrated in the Central Business District.

• All eyes are on Midtown/South End as four key development projects move closer to completion. The Refinery and 300 W Summit topped out, while The RailYard and Dimensional Place progress further as well.

1

Coworking, creative space, and conversions continue into 2019

• Coworking companies continue to expand their footprint in the Queen City, with Midtown/South End next in line. Earlier this year Spaces leased 27,400 s.f. at 307 W Tremont, and now Serendipity Labs and WeWork have entered this booming submarket. Serendipity Labs leased 22,941 sf at The Refinery, while WeWork added to it’s footprint and leased two floors at Beacon’s RailYard development.

• WeWork, headquartered in New York, has grown their presence in Uptown leasing 141,081 across seven floors at 128 South Tryon.

• 9315 N. Tryon St. is an 87,730 square foot office conversion located adjacent to the J.W. Clay Blvd light rail station. This Cambridge Properties owned conversion is one example of the opportunities the University submarket can expect to see as the Blue Line Extension connects the submarket to the CBD.

5

2

Investment moving into the Queen City

• Three buildings in the urban core traded hands in Q3, totaling a combined $167,000,000. Those buildings include; in Uptown, the 458,158 sf Wake Forest University Charlotte Center at 200 N College St, and 129 W Trade St while in Midtown/South End Beacon Partners sold their asset at 500 E Morehead St.

• Lincoln Harris has announced it will move forward with the construction of Capitol Towers II after getting a rezoning position approved on Carnegie Blvd. Also, Capitol Towers I & II are for sale after both buildings are close to full occupancy.

3

Charlotte

© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to JLL and shall be used solely for the purposes of evaluating this proposal. All such

documentation and information remains the property of JLL and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not

to be shown to any third party without the prior written authorization of JLL. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the

accuracy thereof.

Paul Hendershot

Director of Research

+1 980 819 3868

+1 585 503 6730

paul.hendershot@am.jll.com

Office Observations

Thomas Passenant

Research Analyst

+1 980 819 3849

+1 704 345 2185

thomas.passenant@am.jll.com