Investor and tenant demand remains strong in Pittsburgh, as average rental rates steadily increase.

1. Rising office rents stimulateinvestor interest
Source: JLL Research, Real Capital Analytics
Redevelopment gains shareof overall construction activity
Source: JLL Research
Recent leasing activity bytech companies(s.f.)
Source: JLL Research
Regional and national investor interestremains strong
Investor demand is showingnosigns of slowingin Pittsburgh, in part due to
rapidly rising rental rates. The pending 362,000-square-foot Centre City Tower
sale in the CBD is the largest examplethis quarter. New York-basedKing
Penguin Opportunity FundIII has the tower under agreement at anestimated
price of $21.5 million. The18-story Arrott Building downtown also recently found
a buyer, transferring in thesecond quarter to Columbus-basedBatra Realty
Group for $3.0 million. Local investors have alsobeenactive in themarket,
including McKnight Realty Partners, which recently closedon 1.0 million square
feet of office space at River Walk Corporate Centrein theFringe submarket.
Office redevelopmentis an emerging trend in Pittsburgh
Strong office market fundamentals have driven up developer interest downtown,
and with limited greenfieldopportunities in theurbancore, the market has seen
an uptick in office redevelopment plays. The 155,000-square-foot Post-Gazette
building downtown is one suchexample. Plans are solidifying to convert the
office building intoa mixed-use development, renovatingandrepositioning up to
190,000 squarefeet of office space and converting up to three floors into hotel
space. Also plannedfor redevelopment is the Strip District’s Pennsylvania
Railroad Fruit Auction & Sales Building. The project will include 57,000 square
feet of office space, 65,000 square feet of retailspace, and19 live-work units.
Tech companies continue to look towards Pittsburgh’s talent pool
Having realizedthe benefits of being inclose proximity to top universities like
Carnegie MellonUniversity andUniversity of Pittsburgh, tech giants like
Facebook, Google, Apple, and Uber expanded into the region. As a result, tech
companies across the U.S. are looking at Pittsburgh as an attractive location to
grow their companies. Recently announcinginterest to expand intoPittsburghby
the end 2017was the 30 employeeNew Jersey-basedhealthcareinformation
technology startup, Bellrock Controls. Also, the rapidly growingExcel4Apps, an
Excel-based financial reporting software company for Oracle, announced plans
to relocate fromthe South Hills andlease 6,000 square feet at 3 Crossings.
Redevelopmentinvestment strategy now trending
2,257
492,000
202,000
New Construction (s.f.) Redevelopment (s.f.)
Office Insight
Pittsburgh | Q22016
50,355,528
Total inventory (s.f.)
263,130
Q2 2016 net absorption (s.f.)
$23.22
Direct average asking rent
492,000
Total under construction(s.f.)
15.9%
Total vacancy
345,624
YTD net absorption(s.f.)
4.2%
12-month rent growth
61.3%
Total preleased
SalesVolume(M)
DirectAskingRent
$18.00
$20.00
$22.00
$24.00
$0.0
$200.0
$400.0
$600.0
$800.0
2010 2012 2014 YTD
2016
Asking Rents Sales Volume (M)
0
40,000
80,000
120,000
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
©2016 Jones Lang LaSalle IP, Inc. All rights reserved.For more information, contact: Tobiah Bilski | tobiah.bilski@am.jll.com

2. Current conditions – submarket Historical leasing activity (s.f.)
Source: JLL Research Source: JLL Research
Total net absorption (s.f.)
Source: JLL Research
Total vacancy rate(%)
Source: JLL Research
Direct averageasking rent ($p.s.f.)
Source: JLL Research
1,614,997
12,115
293,166 227,090
1,015,146
195,790 214,337
742,463
406,913 345,624
0
600,000
1,200,000
1,800,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016
$20.14
$20.44
$20.21
$20.42
$20.60
$20.97
$21.29
$21.99
$22.69
$23.22
$19.50
$20.75
$22.00
$23.25
2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016
15.5%
16.3%
16.9% 17.0%
15.3% 15.4%
15.9% 15.9% 15.8% 15.9%
13.0%
15.0%
17.0%
19.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016
Landlordleverage
Tenantleverage
Peaking
market
Falling
market
Bottoming
market
Rising
market
4,500,000
4,000,000
5,000,000
4,500,000
659,382
0
1,500,000
3,000,000
4,500,000
6,000,000
2012 2013 2014 2015 YTD 2016
©2016 Jones Lang LaSalle IP, Inc. All rights reserved.
Suburbs
CBD
Pittsburgh
For more information, contact: Tobiah Bilski | tobiah.bilski@am.jll.com

3. Office Statistics
Pittsburgh | Q22016
©2016 Jones Lang LaSalle IP, Inc. All rights reserved.For more information, contact: Tobiah Bilski | tobiah.bilski@am.jll.com
Class Inventory (s.f.)
Total net
absorption
(s.f.)
YTD total net
absorption
(s.f.)
YTD total net
abosprtion
(%)
Direct vacancy
(%)
Total vacancy
(%)
Average direct
asking rent ($
p.s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
CBD Totals 18,928,135 36,670 186,660 1.0% 10.7% 13.2% $25.68 128,000 0
Fringe Totals 7,526,595 -13,513 -24,497 -0.3% 12.3% 14.8% $23.04 30,000 180,000
Oakland/East End Totals 1,993,356 22,523 224,939 11.3% 8.2% 8.3% $33.45 209,000 0
Urban Totals 28,448,086 45,680 387,102 1.4% 10.9% 13.3% $25.33 367,000 180,000
North Totals 3,417,734 14,913 -31,389 -0.9% 9.0% 9.7% $21.87 82,000 200,000
Northern I-79/Cranberry Totals 3,442,781 75,234 85,136 2.5% 9.5% 14.0% $24.99 0 0
East Totals 3,045,135 -3,971 -37,653 -1.2% 32.3% 33.7% $20.25 0 0
South Totals 2,267,259 -2,598 25,757 1.1% 10.1% 10.4% $20.05 0 0
Southpointe Totals 2,822,107 18,167 -219,642 -7.8% 20.5% 24.7% $23.40 150,000 0
West Totals 6,912,426 115,705 136,313 2.0% 20.1% 21.4% $21.58 22,000 112,000
Suburban Totals 21,907,442 217,450 -41,478 -0.2% 17.4% 19.4% $21.63 254,000 312,000
Pittsburgh Totals 50,355,528 263,130 345,624 0.7% 13.7% 15.9% $23.22 621,000 492,000
CBD A 13,102,880 13,438 85,978 0.7% 7.9% 10.2% $29.31 128,000 0
Fringe A 1,905,907 -35,531 -52,997 -2.8% 6.7% 14.5% $23.19 30,000 180,000
Oakland/East End A 969,243 17,023 217,449 22.4% 13.7% 14.0% $36.23 209,000 0
Urban A 15,978,030 -5,070 250,430 1.6% 8.1% 10.9% $29.57 367,000 180,000
North A 706,347 9,758 -28,265 -4.0% 9.2% 10.8% $25.44 82,000 200,000
Northern I-79/Cranberry A 2,766,249 98,643 115,010 4.2% 9.2% 13.0% $25.69 0 0
East A 1,580,784 -870 -34,290 -2.2% 32.1% 32.6% $22.21 0 0
South A 0 0 0 0.0% 0.0% 0.0% $0.00 0 0
Southpointe A 1,759,754 0 -164,558 -9.4% 15.8% 21.1% $24.74 150,000 0
West A 3,767,504 18,562 23,974 0.6% 17.0% 19.3% $22.69 22,000 112,000
Suburban A 10,580,638 126,093 -88,129 -0.8% 16.5% 19.4% $23.69 254,000 312,000
Pittsburgh A 26,558,668 121,023 162,301 0.6% 11.5% 14.3% $26.09 621,000 492,000
CBD B 5,825,255 23,232 100,682 1.7% 16.8% 20.0% $21.54 0 0
Fringe B 5,620,688 22,018 28,500 0.5% 14.2% 14.8% $23.03 0 0
Oakland/East End B 1,024,113 5,500 7,490 0.7% 2.9% 2.9% $21.23 0 0
Urban B 12,470,056 50,750 136,672 1.1% 14.5% 16.3% $22.19 0 0
North B 2,711,387 5,155 -3,124 -0.1% 8.9% 9.5% $17.65 0 0
Northern I-79/Cranberry B 676,532 -23,409 -29,874 -4.4% 10.5% 18.3% $21.94 0 0
East B 1,464,351 -3,101 -3,363 -0.2% 32.6% 34.9% $18.18 0 0
South B 2,267,259 -2,598 25,757 1.1% 10.1% 10.4% $20.05 0 0
Southpointe B 1,062,353 18,167 -55,084 -5.2% 28.4% 30.8% $22.12 0 0
West B 3,144,922 97,143 112,339 3.6% 23.7% 23.8% $20.54 0 0
Suburban B 11,326,804 91,357 46,651 0.4% 18.3% 19.5% $19.82 0 0
Pittsburgh B 23,796,860 142,107 183,323 0.8% 16.3% 17.8% $20.88 0 0