Broken Records SAN JOSE SILICON VALLEY Q Research & Forecast Report. Market Indicators - Santa Clara County

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1 Research & Forecast Report SAN JOSE SILICON VALLEY Q Broken Records > > Leasing activity topped out at 5.8 million square feet during the fourth quarter of 2015 > > Total available space dipped 6.9% in the fourth quarter for all product types combined > > Net absorption stands at 9.5 million square feet year to date Silicon Valley s economy is looking the best it has in years at the end of During 2015, Silicon Valley companies took claim to 38.0% of the total US venture capital dollars invested throughout the fourth quarter with more than $4.2 billion invested in 264 deals. Silicon Valley remains the nation s strongest job market. According to data released by the U.S. Bureau of Labor Statistics, total payroll employment in Santa Clara County expanded by 5.1% during the twelve month period ending in November. The unemployment rate in Santa Clara County sits at just 3.8%, compared to the state average of 5.7%. During the fourth quarter of 2015 a total of 5.8 million square feet of new deals transacted across all product types. This amount of demand translated into an occupancy gain of 1.6 million square feet. Total available space in the Silicon Valley now measures 23.8 million square feet, translating into an overall availability rate of 7.2% for all product types throughout the Valley. Available space continues to decline in the Valley and is at its lowest level since the first quarter of 2001, when the availability rate was just 6.5%. Vacancy Vs. Availability Rates Silicon Valley All Products 15.00% 12.00% 9.00% 6.00% Market Indicators - Santa Clara County Average Household Income Population Growth White Collar Jobs Market Trends Relative to prior quarter Q Q1 2016* Vacancy Net Absorption Construction Rental Rate *Projected $128,006 Summary Statistics Q Silicon Valley All Products Previous Quarter Current Quarter Overall Vacancy Rate 5.66% 5.29% Net Absorption 2,420,423 1,679,187 Construction Completed 1,651, ,697 Under Construction 8,315,589 8,788,989 Office Asking Rents* $3.75 FS $4.08 FS R&D Asking Rents* $1.73 NNN $1.73 NNN Industrial Asking Rents* $0.91 NNN $1.12 NNN Warehouse Asking Rents* $0.69 NNN $0.69 NNN *Asking Rents Reported Monthly 6.45% % 3.00% Economic Indicators Previous Quarter Current Quarter 0.00% Availability Rate Vacancy Rate Total VC Funding $8.0 Billion $4.2 Billion Total Number of Deals Unemployment Rate 4.1% 3.8% Overall availability dipped 56 basis points to 7.2% during the fourth quarter, while vacancy fell 37 basis points to 5.3%

2 Office > > Leasing activity measured 1.9 million square feet during the fourth quarter of 2015 > > Net absorption stands at 4.5 million square feet year to date, 8.3% more than the total measured in 2014 and 2013 combined. > > Total available space fell 4.8%, to an overall availability rate of 8.4% With healthy tenant demand throughout the Silicon Valley, new user activity topped out at 1.9 million square feet of gross absorption. This level of activity is down 39.9% from the 3.2 million square feet measured during the third quarter and brings the year to date total to 10.3 million square feet. The 10.3 million square feet of absorption measured during 2015 is 15.5% higher than that measure during 2014 and is the highest level of absorption measured since Colliers began tracking absorption statistics in During the fourth quarter, office tenants only gave back 1.1 million square feet of office space to the market. With the combination of solid demand and a low level of roll-over space, the Silicon Valley office market recorded another occupancy gain during the period, measuring 847,079 square feet. This is the fourteenth straight quarter that the Silicon Valley office market has recorded positive net absorption. The office market has absorbed more than 4.5 million square feet during 2015, this is 8.3% higher than the total occupancy gain measured during 2014 and 2013 combined. While occupancy gains hit record highs, available space in the Silicon Valley office market continues to thin. The overall office availability rate sits at 8.4%, the lowest it has been since the fourth quarter of Currently, Colliers is tracking 33 tenant requirements that are seeking more than 100,000 square feet. According to Colliers available inventory, these 33 tenants have only 17 options for contiguous office spaces 100,000 square feet or greater to choose from. Of the 17 spaces, only nine are existing, and eight are under construction. Currently more than 7 million square feet of office space is under construction, with total potential development reaching more than an astounding 53 million square feet in the form of proposed developments. New completions recorded during the fourth quarter included four buildings preleased by Apple, two at Main Street Cupertino totaling 275,426 square feet, and two on Mathilda Avenue in Sunnyvale totaling 213,117 square feet. The largest new office deal completed during the fourth quarter was an owner user purchase by Broadcom. The chip making company closed on Innovation Place, a four building project totaling 543,900 square feet in North San Jose. Boston properties was the seller. As a result of the heightened demand and tight availability, the office market measured an uptick in starting rates during the fourth quarter. Average starting rates for office space have climbed 17.4% over the last twelve months, closing the quarter at $3.97 per square foot, full service. Average asking rents followed a similar trend line and office space in the Silicon Valley is now being marketed at an average rental rate of $4.08 per square foot, full service, up 28.1% from January 2014 and is the first time that average asking rates have surpassed the $4.00 mark since the second quarter of Historical Office Vacancy 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Office Availability Rates Select Silicon Valley Cities Palo Alto Mountain View Sunnyvale Santa Clara West Valley San Jose Morgan Hill 2.5% 4.3% 5.1% 6.8% 10.9% 11.7% 11.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Office Availability Breakdown by Size Range 22% 35% 30% Historical Average = 13.0% 8% 5% 3,000-5,000 5,001-10,000 10,001-20,000 20,001-50,000 50,001 - Above 2 Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International

3 SAN FRANCISCO BAY FREMONT 680 Select Colliers Transactions Office Lease Activity Achronix Semiconductor Corp MILPITAS 2953 Bunker Hill Lane, Santa Clara Renewal 16,613 PALO ALTO 280 MT. VIEW 237 TeleNav Inc SUNNYVALE 4655 Great America Parkway, Santa Clara LOS ALTOS SANTA CLARA Sublease 54, CUPERTINO/ SARATOGA SAN JOSE 87 Robin Systems Inc 224 Airport Parkway, San Jose 13,016 CAMPBELL/ LOS GATOS Palo Alto Networks 3200 Tannery Way, Santa Clara Prelease/Expansion 310,000 MORGAN HILL/ GILROY InfoGain Inc 485 Alberto Way, Los Gatos Renewal 14,487 Select Colliers Transactions - Office Sale Activity PROPERTY ADDRESS SIZE SELLER BUYER 3333 Scott Boulevard Phase 1, Santa Clara 460,020 Menlo Equities LLC Clarion Partners 6920 Santa Teresa Boulevard, San Jose 23,671 AJ Callo Brent Roles 100 E Hamilton Avenue, Campbell 6,611 Barry Mirkin Bogomilsky Trust Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International 3

4 R&D > > Total leasing activity in 2015 totaled 9.9 million square feet, a 4.0% increase from totals measured in > > The R&D availability rate sits at 9.4%, the lowest it has been since the first quarter of 2001 > > The Silicon Valley R&D sector has measured five straight quarters of positive net absorption The Silicon Valley R&D sector maintained strong momentum during the fourth quarter. Leasing and user-sale activity measured 2.2 million square feet, an 11.6% decrease from the amount of activity measured during the third quarter, yet is still a healthy amount of tenant demand measuring in over the 2.0 million square foot mark. The Silicon Valley R&D sector recorded an occupancy gain during the period, totaling 475,765 square feet. Year to date, the Silicon Valley R&D market has measured 2.8 million square feet of positive net absorption. On the supply side, the pipeline of pre-improved R&D space that came on the market during the fourth quarter decreased 16.4% from totals measured during the third quarter, to 1.7 million square feet. The decrease in roll-over space measured during the period is a continued demonstration of the heightened demand for R&D space in the Silicon Valley. Historical R&D Vacancy 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% R&D Availability Rates Select Silicon Valley Cities Mountain View Sunnyvale Santa Clara 2.8% 4.7% Historical Average = 13.2% 9.9% Total available R&D space in the Silicon Valley sits at 14.4 million square feet, which translates to an overall availability rate of 9.4%, the lowest it has been since the first quarter of 2001 when the R&D availability rate hit 6.6%. When measuring only vacant space on the market, the R&D vacancy rate in the Silicon Valley fell 38 basis points during the fourth quarter to 6.9%. San Jose Milpitas Fremont 10.5% 14.2% 15.4% The largest new deals signed for R&D space during the fourth quarter were all completed within the North San Jose submarket. The first was signed by Silver Spring Networks, who inked a deal for 191,423 square feet at Champion Station, a project which has undergone major renovations since it was vacated and sold by Cisco, TMG Partners purchased the 382,929 square foot project in The next largest deal inked during the quarter was signed by Google, the tech giant s first move into the city of San Jose. Both deals are significant as they support a trend of healthy tech companies migrating south to find available space. Driving the activity in the Silicon Valley s southern markets is less-expensive real estate, more options for large blocks of space and generous development potential, which looks attractive as other cities start to limit the number of possible new projects. Silver Spring Networks will be relocating from Redwood City, while Google holds the majority of its real estate portfolio in Mountain View and Sunnyvale. Average starting rates for R&D space in the Silicon Valley have climbed 30.9% since the beginning of the year, closing the books on the fourth quarter at $1.86 per square foot, NNN. The weightedaverage asking rent for R&D space followed in this upward climb and is now $1.73 per square foot NNN, up 16.2% from the same period one year earlier. Morgan Hill 4.6% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% R&D Availability Breakdown by Size Range 11% 13% 7% 6% 27% 36% 5,000-20,000 20,001-40,000 40,001-60,000 60,001-80,000 80, , ,001 and Above 4 Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International

5 SAN FRANCISCO BAY FREMONT 680 Select Colliers Transactions R&D Lease Activity Fairchild Semiconductor 1272 Borregas Avenue, Sunnyvale MILPITAS 95,626 PALO ALTO 280 MT. VIEW 237 Silver Spring Networks W Tasman Drive, San Jose SUNNYVALE LOS ALTOS SANTA CLARA 191,423 CUPERTINO/ SARATOGA 85 SAN JOSE 87 Forescout Technologies 190 W Tasman Drive, San Jose 95,948 CAMPBELL/ LOS GATOS Tabuchi Electric Company of America 5225 Hellyer Avenue, San Jose 41,493 MORGAN HILL/ GILROY Teradyne 5325 Hellyer Ave, San Jose Renewal 128,000 Select Colliers Transactions - R&D Sale Activity PROPERTY ADDRESS SIZE SELLER BUYER McCarthy Boulevard, Milpitas 65,664 Prologis P&L Khuu Family LP 3901 North 1st Street, San Jose 64, First I, LLC Prospecthill Group West Maude Avenue, Sunnyvale 40,925 Sunnyvale Properties, LLC Wizardly Holdings, LLC 1025 Terra Bella Avenue, Mountain View 23,157 The James R. Benson Living Trust Green Valley Corporation 999 Hamlin Court, Sunnyvale 16,760 Castagnolo Properties County of Santa Clara Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International 5

6 Industrial > > Leasing activity measured 1.0 million square feet during the fourth quarter > > The industrial sector measured an occupancy gain totaling 275,809 square feet during the fourth quarter. > > Average asking rates are up 47.1% year-to-date > > 1.1 million square feet of industrial space currently is under construction in the Silicon Valley During the fourth quarter, Silicon Valley s industrial sector measured 1.0 million square feet of gross absorption, up from the 703,738 square feet recorded during the third quarter. As a result of the increased level of activity, the industrial sector closed the fourth quarter with a modest occupancy gain of 275,809 square feet. Year to date, the industrial sector has measured an occupancy gain totaling 946,486 square feet. This is a significant increase from the occupancy gain measure during 2014, when net absorption topped out at just 77,746 square feet. This is in a large part due to the 506,490 square foot lease signed by Tesla during the second quarter of this year. The electric vehicle company inked a deal at 901 Page Avenue in Fremont, the long vacant former Solyndra facility. The overall availability rate for industrial space in the Silicon Valley sits at only 2.55%. This is the lowest the availability rate has fallen in the Silicon Valley industrial market since Colliers began tracking industrial statistics in With minimal availability and relatively very little development within the borders of the Silicon Valley, tenants continue to struggle to find space as the supply and demand ratio are thrown off balance. After coming out of the third quarter where no new deals over 50,000 square feet were signed, the fourth quarter tally came in at four new deals above the 50,000 square foot mark. The largest new deal recorded during the period was on Little Orchard Street in San Jose, where Loral Space Systems signed on for 158,200 square feet of industrial space. Apple also inked a new industrial deal during the fourth quarter, committing to 105,000 square feet of space on Uranium Drive in Sunnyvale. All nine cities included in Colliers Silicon Valley statistics sit with an industrial availability rates lower than 10% overall. The city claiming the highest availability rate is Milpitas, with an overall availability of 8.9%. On the opposite side of the spectrum, San Jose takes claim to the lowest industrial availability rate, with only 1.5% of the total inventory available for lease. Furthermore, only two of the nine cities have an availability rate greater than 6% for industrial space. Historical Industrial Vacancy 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Industrial Availability Rates Select Silicon Valley Cities Campbell Sunnyvale Santa Clara San Jose Milpitas Fremont Morgan Hill 1.7% 1.5% 2.1% 3.0% 4.9% 6.3% 8.9% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% Industrial Availability Breakdown by Size Range 18% 3% 3% 1% 1% Historical Average = 6.2% 5,000-20,000 20,001-40,000 When comparing average starting rates for industrial deals completed during the period, the Valley measured an uptick quarter-over-quarter to $0.98 per square foot, NNN. Over the most recent twelve month period, starting rates have climbed 42.0% for industrial space. Weighted average asking rates also measured an uptick and surpassed the $1.00 mark for the first time since 2002, for an overall weighted average of $1.12 per square foot, NNN. At the close of the quarter, average asking rates were 47.1% higher than those recorded during the same period of % 40,001-60,000 60,001-80,000 80, , ,001 and Above 6 Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International

7 SAN FRANCISCO BAY FREMONT 680 Select Colliers Transactions Industrial Lease Activity Altair Christy Street, Fremont MILPITAS 26,496 PALO ALTO 280 MT. VIEW SUNNYVALE 237 AFR Hotchkiss Street, Fremont LOS ALTOS SANTA CLARA 40,830 CUPERTINO/ SARATOGA 85 SAN JOSE 87 3D Access Industries Hotchkiss Street, Fremont 21,000 CAMPBELL/ LOS GATOS Apple, Inc Bowers Avenue, Santa Clara 20,074 MORGAN HILL/ GILROY Process Displays 2250 Walsh Avenue, Santa Clara 13,068 Select Colliers Transactions - Industrial Sale Activity PROPERTY ADDRESS SIZE SELLER BUYER 1 Timothy Drive, San Jose 41,414 Paul Lin Lee Brothers Foodservice 120 Mast Street, Morgan Hill 23,629 Sam Laub RAAF Mast 255 Fitzgerald Avenue, Gilroy 22,720 Filice Trust Rich & Rosemary Bergia Comstock Street, Santa Clara 20,440 Renault & Handley Everex LLC 356 McGlincey Lane, Campbell 13,461 Lily Clarizio & Joe Mantia RLD Family Partnership Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International 7

8 Warehouse > > Leasing activity measured a 19.4% decrease quarter-over-quarter > > The warehouse availability rate is the lowest it has been since Colliers began tracking warehouse statistics in 1988, at 3.0% throughout the Silicon Valley > > Net absorption for 2015 stands at 1.2 million square feet, a 69.4% increase from the occupancy gain measured in Activity in the Silicon Valley warehouse sector was stable during the fourth quarter of the year, recording 589,915 square feet of gross absorption. This is a 19.4% decrease in activity quarter-over-quarter, and brings the year-to-date tally to 3.2 million square feet. However, when measuring demand on an annual basis, the Silicon Valley warehouse market recorded another strong year in With robust demand totaling 3.2 million square feet of gross absorption, this is the highest level of warehouse activity recorded since Despite the decrease measured in tenant demand during the quarter, the warehouse sector measured a modest occupancy gain totaling 80,534 square feet. This brings the year to date occupancy gain to 1.2 million square feet, which is 69.4% more than that total occupancy gain measured during 2014, putting a strong year for the Silicon Valley warehouse market down in the books. Historical Warehouse Vacancy 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Warehouse Availability Rates Select Silicon Valley Cities Sunnyvale Santa Clara 2.8% 3.2% Historical Average = 6.6% During the fourth quarter the warehouse market measured a slight increase in the levels of pre-improved space coming onto the market. Up 45.6% from the third quarter, warehouse tenants in the Silicon Valley only kicked back 509,381 square feet of vacant space to the market. Despite the quarter-over-quarter increase, in total, this is not a significant amount of space in relation to tenant demand and is further constricting this already tight product type throughout Silicon Valley. San Jose Milpitas Fremont Morgan Hill 0.0% 0.4% 2.9% 7.4% After four consecutive quarters of positive net absorption measured in 2015, available space continues to decline. Total available warehouse space in the Silicon Valley now measures just 1.1 million square feet, down 34.5% from the previous quarter. This amount of space translates to an overall availability rate of 3.0%, the lowest it has been since Colliers began tracking warehouse statistics in When measuring only vacant space within the warehouse market, the true vacancy rate stands at only 2.3% throughout the Silicon Valley. There were sixteen new deals inked for warehouse space during the fourth quarter of the year, with an average deal size of 36,869 square feet. This is up from the fifteen deals inked during the third quarter, which had an average deal size of 48,793 square feet. With only 22 available warehouse options throughout the Silicon Valley at the close of the fourth quarter, tenants are limited in their search for new space and may begin looking in neighboring regions such as the East Bay and Central Valley for viable space. The largest new deal signed during the quarter was KGP Telecommunication s sublease of 120,000 square feet on Alma Street in San Jose, followed by Sun Basket, who committed to 64,594 square feet on Olinder Court in San Jose. Gilroy 4.3% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Warehouse Availability Breakdown by Size Range e 6% 5,000-20,000 31% 20,001-40,000 40,001-60,000 44% 60,001-80,000 6% 80, , ,001 and Above 13% 8 Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International

9 SAN FRANCISCO BAY FREMONT 680 Select Colliers Transactions Warehouse Lease Activity The RK Logistics Group Albrae Street, Fremont MILPITAS 43,230 PALO ALTO 280 MT. VIEW SUNNYVALE 237 Sun Basket 1170 Olinder Court, San Jose LOS ALTOS SANTA CLARA 64,594 CUPERTINO/ SARATOGA 85 SAN JOSE 87 KGP Telecommunications 205 E Alma Street, San Jose Sublease 120,000 CAMPBELL/ LOS GATOS RS Display Inc. 198 E 9th Street, Gilroy 39,600 MORGAN HILL/ GILROY American Horticultural Supply 6205 Engle Way, Gilroy Expansion 44,640 Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International 9

10 Market Comparisons Silicon Valley OFFICE MARKET CLASS TOTAL INVENTORY DIRECT VACANT SUBLEASE VACANT DIRECT OCCUPIED SUBLEASE OCCUPIED TOTAL AVAILABLE AVAILABILITY RATE Q AVAILABILITY RATE Q NET ABSORPTION Q YTD COMPLETED Q UNDER CONST. FS WTD AVG ASKING CAMPBELL / LOS GATOS A 1,490,525 51,593-17,625 2,300 71, % 6.3% 10, ,020 6, ,750 $4.06 B 2,179,700 74,419-34, , % 3.8% (485) (3,066) - - $2.92 C 227,312 10,709-4,220 2,984 17, % 5.3% (1,700) (4,106) - - $3.55 Total 3,897, ,721-56,202 5, , % 4.9% 8, ,848 6, ,750 $3.53 CUPERTINO / SARATOGA A 1,201,794 11,011 4,154 18,253-33, % 3.3% 285, , ,516 2,800,000 $4.78 B 2,779,207 23,846 33,414 55,428 81, , % 6.4% (28,652) (23,621) - - $4.05 C 156,752 2, , % 1.1% (480) (1,246) - - $2.95 Total 4,137,753 37,034 37,568 73,681 81, , % 5.4% 255, , ,516 2,800,000 $4.14 FREMONT / MILPITAS A 863, ,360-18,769 14, , % 19.6% 3,873 (1,576) - 9,656 $2.19 B 1,666, ,221-18, , % 12.5% 33,989 64, $2.38 C 579,071 14,025-4,048-18, % 3.1% - (2,067) - - $1.82 Total 3,109, ,606-40,981 14, , % 12.8% 37,862 60,375-9,656 $2.27 GILROY / MORGAN HILL A 418,491 16,904-25,000-41, % 10.0% - 2, $2.23 B 213,939 24,637-2,477-27, % 12.7% - (6,400) - - $1.86 C 315,907 35,009-3,385-38, % 12.2% - (2,977) - - $2.16 Total 948,337 76,550-30, , % 11.3% - (6,609) - - $2.13 LOS ALTOS A 277,215 1,358 96,562 2, , % 1.1% (95,002) (66,512) - 18,300 $6.98 B 500,812 13,559-15,518 7,466 36, % 7.1% (1,829) 11, $4.75 C 375,197 6,299-19,409-25, % 7.0% - (7,229) - - $5.62 Total 1,153,224 21,216 96,562 37,294 7, , % 5.6% (96,831) (61,792) - 18,300 $6.39 MOUNTAIN VIEW A 3,556,658 11,785 22,254 46,462 54, , % 2.2% (28,665) 902, ,398 $7.08 B 1,302,608 32, ,468 17, , % 6.0% $5.41 C 494,475 22,937-3,261-26, % 5.4% 3,520 (7,702) - - $5.42 Total 5,353,741 67,134 22, ,191 71, , % 3.4% (24,839) 895, ,398 $6.58 PALO ALTO A 4,740,717 68,137 5, ,293 20, , % 5.9% (29,212) 108, ,518 $7.37 B 4,221,158 81,580 26,748 35,996 49, , % 4.1% (6,053) 83, $6.53 C 1,254,578 17,666 9,353 6,950 1,820 35, % 2.6% (4,299) (15,988) - - $5.92 Total 10,216, ,383 41, ,239 71, , % 4.8% (39,564) 176, ,518 $7.08 SAN JOSE A 13,409,082 1,339, , , ,052 1,859, % 18.5% 343,183 1,185,828-1,362,357 $3.53 B 9,694, ,236 38,921 98,459 22, , % 10.2% 45,319 (81,745) - - $2.61 C 3,867, ,286 2,066 96,589 3, , % 9.7% (5,168) 36, $2.14 Total 26,970,784 2,390, , , ,183 3,172, % 14.3% 383,334 1,140,137-1,362,357 $3.19 SANTA CLARA A 7,259, , ,689 53, , , % 9.8% 82, , , ,000 $4.17 B 4,221, ,055-76, , % 8.9% (7,240) (134,792) - - $2.86 C 628,174 35,827-14,159-49, % 8.7% 15,600 12, $1.97 Total 12,109, , , , ,048 1,420, % 9.4% 90, , , ,000 $3.90 SUNNYVALE A 9,228, ,062 49,321 4,342 74, , % 2.1% 194,466 1,002, ,117 1,555,629 $5.02 B 1,407,060 24,907-21,010-45, % 6.2% 36,799 55, $3.94 C 490,595 5, , % 21.1% 360 7, $2.13 Total 11,126, ,249 49,321 25,352 74, , % 3.5% 231,625 1,065, ,117 1,555,629 $4.97 SILICON VALLEY TOTALS A 42,446,284 2,346, , , ,152 3,843, % 9.8% 767,092 4,587, ,697 7,094,608 $4.41 B 28,186,793 1,520,872 99, , ,565 2,216, % 7.9% 72,154 (33,813) - - $3.37 C 8,389, ,215 11, ,021 8, , % 8.2% 7,833 14, $2.66 Total 79,022,818 4,310, ,151 1,095, ,057 6,673, % 8.9% 847,079 4,567, ,697 7,094,608 $4.08 QUARTERLY COMPARISON AND TOTALS 4Q-15 79,022,818 4,310, ,151 1,095, ,057 6,673, % 8.9% 847,079 4,567, ,697 7,094,608 $4.08 3Q-15 78,167,872 4,743, ,228 1,255, ,436 6,978, % 9.6% 1,719,296 3,720,848 1,477,768 6,741,352 $3.75 2Q-15 77,229,806 5,162, ,263 1,388, ,708 7,416, % 11.3% 972,289 2,001, ,375 7,770,638 $3.68 1Q-15 76,705,120 5,926, ,015 1,731, ,245 8,694, % 11.1% 1,029,263 1,029,263 1,228,557 8,090,151 $3.63 4Q-14 75,136,480 6,014, ,237 1,164, ,782 8,310, % 12.2% 878,251 2,021, ,837 8,086,492 $ Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International

11 Market Comparisons Silicon Valley R&D, INDUSTRIAL & WAREHOUSE MARKETS TYPE TOTAL INVENTORY DIRECT VACANT SUBLEASE VACANT DIRECT OCCUPIED SUBLEASE OCCUPIED TOTAL AVAILABLE AVAILABILITY RATE Q AVAILABILITY RATE Q NET ABSORPTION Q YTD COMPLETED Q UNDER CONSTR. NNN WTD AVG ASKING CAMPBELL R&D 1,371,053 73,747 24,660 66, , 12.0% 12.0% (1,350) 20, $1.73 IND 995,329 52,020-5,000 5,290 62, % 2.8% (31,070) (49,020) - - $1.68 TOTAL 2,366, ,767 24,660 71,473 5, , % 8.2% (32,420) (28,522) - - $1.71 CUPERTINO R&D 2,856, ,220-13, % 0.5% $2.65 TOTAL 2,856, ,220-13, % 0.5% $2.65 FREMONT R&D 19,730,917 1,831,538 97, , ,373 2,804, % 14.5% 171, , $1.22 IND 9,740,511 62,489 1, , , % 1.7% 49, , ,920 $0.76 WSE 7,496, ,800-28, % 3.8% - 945, ,400 $0.70 TOTAL 36,967,737 1,894,027 98, , ,373 3,041, % 9.0% 221,100 2,514, ,320 $1.18 GILROY R&D 372,104 8,789-9,499-18, % 8.6% 23,149 67, $0.79 IND 1,592,261 51,971 8, , % 5.5% 26,720 10, $0.66 WSE 3,806, , , % 6.2% 44,640 92, $ - TOTAL 5,770, ,590 8,806 9, , % 6.2% 94, , $0.70 LOS GATOS R&D 337,324 6, , % 4.7% 9,536 (6,334) - - $2.42 TOTAL 337,324 6, , % 4.7% 9,536 (6,334) - - $2.42 MILPITAS R&D 13,538, , , ,642 7,034 1,416, % 10.6% (118) 132, $1.55 IND 3,049, ,162 2,424 31,866 3, , % 9.6% (105,463) (16,718) - - $0.95 WSE 4,705, , , , % 10.6% (22,500) (248,284) - - $0.72 TOTAL 21,293,821 1,351, , ,611 10,294 2,037, % 10.4% (128,081) (132,423) - - $1.35 MORGAN HILL R&D 2,849, ,056 5,625 18, , % 5.9% 44,320 (12,153) - - $0.90 IND 2,339, , , % 7.5% 61,729 (43,864) - - $0.96 WSE 482, % 0.0% $ - TOTAL 5,672, ,533 5,625 18, , % 6.1% 106,049 (56,017) - - $0.92 MOUNTAIN VIEW R&D 13,701, , ,232 42,537 36, , % 2.6% (131,650) (154,238) - - $2.94 IND 1,688,460 16,700-24,000-40, % 2.4% (6,560) (7,870) - - $2.17 TOTAL 15,389, , ,232 66,537 36, , % 2.6% (138,210) (162,108) - - $2.87 PALO ALTO R&D 13,370,231 6,000 57,666 11,300 3,609 78, % 0.6% - (24,284) - 47,917 $3.09 TOTAL 13,370,231 6,000 57,666 11,300 3,609 78, % 0.6% - (24,284) - 47,917 $3.09 SAN JOSE R&D 41,585,499 4,190, ,631 1,316, ,979 6,401, % 16.0% 366, , ,000 $1.68 IND 23,265, ,415 41, , , % 3.1% 223, , ,144 $1.20 WSE 16,978, ,153-54, , % 3.8% 75, , $0.63 TOTAL 81,829,427 4,834, ,831 1,476, ,979 7,245, % 9.8% 664,822 1,357, ,144 $1.55 SANTA CLARA R&D 19,563,658 1,414,304 64, , ,382 1,928, % 9.7% 85, , $2.02 IND 11,522,581 75,815-99,081 16, , % 1.2% 26, , $0.95 WSE 3,290,473 21,861-71,296-93, % 3.0% (16,800) 87, $0.89 TOTAL 34,376,712 1,511,980 64, , ,182 2,213, % 6.2% 94, , $1.93 SUNNYVALE R&D 22,910, ,146 39, ,728 51,486 1,080, % 5.1% (91,169) 334, $2.60 IND 6,089, ,956 10,060 10, , % 3.1% 2,422 (49,867) - - $1.12 WSE 1,792,771 56, , % 3.2% - 99, $ - TOTAL 30,792,449 1,013,875 49, ,728 51,486 1,317, % 4.6% (88,747) 383, $2.43 SILICON VALLEY TOTALS R&D 152,186,535 9,482,642 1,077,284 3,005, ,406 14,424, % 9.8% 475,765 2,821, ,917 $1.73 IND 61,498,395 1,061,092 63, ,660 25,350 1,569, % 3.2% 275, ,486-1,194,064 $1.12 WSE 38,983, , ,614-1,179, % 4.7% 80,534 1,205, ,400 $0.69 TOTAL 252,668,395 11,468,403 1,141,265 3,678, ,756 17,173, % 7.4% 832,108 4,973,346-1,694,381 $1.60 QUARTERLY COMPARISON AND TOTALS 4Q ,668,395 11,468,403 1,141,265 3,678, ,756 17,173, % 7.4% 832,108 4,973,346-1,694,381 $1.60 3Q ,324,418 12,323,595 1,265,458 4,039, ,817 18,623, % 7.5% 701,127 4,141, ,296 1,574,237 $1.58 2Q ,919,908 13,388,504 1,082,487 3,299, ,556 18,739, % 8.7% 2,069,078 3,440,111-1,478,153 $1.53 1Q ,910,294 15,875,910 1,084,472 3,349,747 1,452,806 21,762, % 8.8% 1,371,033 1,371, , ,213 $1.42 4Q ,937,322 16,903,856 1,351,619 2,554,630 1,003,083 21,813, % 9.9% 1,106,844 1,974, , ,009 $1.32 Silicon Valley Research & Forecast Report Fourth Quarter 2015 Colliers International 11

12 Understanding Absorption Colliers uses several measurements to track market conditions and deal flow. While related, the formulas to arrive at these measurements differ. Using the results of the most recent quarter, here is how Colliers measures change in availability, net absorption and effective net absorption. Change in Availability: This measurement is simply the difference between the amounts of space available at the end of one period to the next. The table below shows that total available space decreased by 497,581 square feet in the year s second quarter. Note that change in availability includes adjustments for space that is taken off the market. Space taken off the market is not a factor in net absorption measurements. Total Available end of 3Q15 28,125,436 Plus: Vacant & Occupied Space that came available in 4Q15 3,278,952 Plus: New Shell added in 4Q15 866,697 3Q15 Available + Newly Available in 4Q15 32,271,085 Less: 4Q15 Gross Absorption -5,871,412 Less: 4Q15 Adjustments/Taken off Market 1,228,855 Total Available end of 4Q15 27,627,855 Net Absorption: Net absorption measures the change in occupied space from one period to the next. In this measurement, it is important to distinguish that a building may be available, but not vacant (often the case in a sublease situation, for example). Therefore, occupancy is not reduced (negative net absorption) until the space is vacated, and sometimes that does not happen until the space is leased, creating a net absorption wash for the deal and for that particular period. New Vacant Space that came available 4Q15-836,206 Previously Available Space that was vacated in 4Q15-3,356,019 4Q15 Total Vacant added (Occupancy Loss) -4,192,225 4Q15 Gross Absorption (occupancy gain) 5,871,412 4Q15 Net Absorption (change in Occupancy) 1,679,187 Effective Net Absorption: In 2003, Colliers created a measurement of effective net absorption. Effective net absorption uses the same formula as the net absorption formula, except that it treats any space that comes available as if it is vacant, whether it is or it is not. The purpose of the measurement is to get a better real time gauge of occupancy flow in and out of the market, acknowledging that space that is available for lease is likely to be vacated shortly and underutilized presently. 502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 $2.3 billion in annual revenue 1.7 billion square feet under management 16,300 professionals and staff New Vacant Space that came available 4Q15-836,206 Occupied Space that came available 4Q15-2,442,746 4Q15 Total Available added -3,278,952 4Q15 Gross Absorption 5,871,412 4Q15 Effective Net Absorption 2,592,460 FOR MORE INFORMATION Executive Managing Director Jeff Fredericks, SIOR Executive Managing Partner jeff.fredericks@colliers.com tel CA License No San Jose Research Jennifer Vaux, CPRC Regional Research Manager jennifer.vaux@colliers.com tel Colliers International San Jose 450 West Santa Clara Street San Jose, CA United States tel fax CA License No Copyright 2016 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. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 12 North American Research & Forecast Report Q Office Market Outlook Colliers International