Stability SAN FRANCISCO PENINSULA Q Research & Forecast Report 1.90% 449, ,800. San Mateo County

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1 Research & Forecast Report SAN FRANCISCO PENINSULA Stability San Mateo County Labor Force >> San Mateo County maintains its strong economic growth Number of Employed Unemployment Rate >> Average asking rates remain stable across all submarkets The San Francisco Peninsula continues to demonstrate its desirability with vacancy and average asking rents holding steady. San Mateo County s job market continues to grow and remains an attractive location for companies to relocate or expand into demonstrated by Facebook s rapid expansion in Menlo Park. With the lowest unemployment rate in the state and a thriving economy, San Mateo County is predicted to continue its growth into the second half of. Available space across all submarkets within San Mateo County continues to be scarce and desirable. This quarter, average asking rent for office space dropped marginally from $5.18 to $5.14 per square foot, per month and the vacancy rate decreased from 6.86 to 6.39 percent. San Mateo County s research and development (R&D) sector also saw a dip in average asking rent from $3.79 to $3.73, while the vacancy rate climbed 25 basis points to 2.05 percent. The industrial market saw small changes with an average asking rent of $1.48, increasing by 0.60 percent from last quarter and a growth in vacancy rate of three basis points, closing at 1.53 percent. Overall, the commercial real estate market on the San Francisco Peninsula demonstrates its stability through minor changes to rent and vacancy rates. 1.90% 449, ,800 *Source: labormarketinfo.edd.ca.gov/data/top-statistics.html Market Trends Relative to prior period All Products Under Construction Office Rental Rate R&D Rental Rate Industrial/Warehouse Rental Rate *Projected Summary Statistics Previous Quarter Current Quarter 3.85% (227,182) 0 5,408,261 $5.18 $3.80 $ % 89, ,079 5,149,182 $5.14 $3.73 $1.48 Previous Quarter Current Quarter Consumer Price Index 4.10% 63.00% 2.74% % 62.70% 2.87% Consumer Confidence Business Confidence All Products Construction Completed () San Mateo County All Products 0.8% 3% 0.6% 2% 0.4% 1% 0% 0.2% Q3 Q4 Q1 Direct Vacancy Rate Q3 Q4 Q1 Office Asking Rents (FS)* R&D Asking Rents (NNN)* Sublease Vacancy Rate Direct Vacancy Rate Under Construction () 4% 0.0% Sublease Vacancy Rate Overall vacancy rate decreased 14 basis points from 3.85 percent last quarter to 3.71 percent. Direct vacancy decreased 12 basis points and sublease vacancy decreased by 2 basis points since last quarter. Q3 * Vacancy Overall Vacancy Rate Direct Vacancy vs. Sublease Vacancy Rates Industrial Asking Rents (NNN)* *Asking Rents Reported Monthly Economic Indicators U.S. Unemployment Rate Labor Force Participation Interest Rate - 10 Year Treasury *Source: tradingeconomics.com/united-states/indicators

2 Office > > Slight increase to historically high rents show the market's strength > > WeWork's San Mateo lease was the largest office deal this quarter San Mateo County Office Rent vs. Vacancy 25% $6.00 The office vacancy rate on the Greater San Francisco Peninsula, covering San Mateo County, Palo Alto, Mountain View and Los Altos decreased once again closing the first half of the year at 5.11 percent, a decrease of a full 100 basis points from last quarter. For San Mateo County alone, vacancy rates have dipped to 6.39 percent from 6.92 percent a year ago. Gross absorption, a measure of all leasing activity in a given period, for the Greater San Francisco Peninsula totaled 1,568,374 square feet this quarter. This figure is above recent averages as it was skewed by a single Mountain View transaction of Facebook's 225,000 square foot lease at 401 San Antonio Road. Specific to the statistics covered in this report, San Mateo County s total gross absorption was a fairly modest 498,501 square feet, as a lack of available space, particularly in larger blocks, continues to dampen leasing activity and growth. The net absorption for San Mateo County was 168,226 square feet, up significantly from last quarter, which was 45,686 square feet. Lease rates throughout the region remain at the same high levels seen since early and have remained surprisingly rigid given the exceptionally low vacancy rates we have seen over that same period. The average asking rate for the Greater San Francisco Peninsula currently stands at $5.40 fully serviced per square foot. This is within the range the market has settled into over the past eight quarters. For San Mateo County, the average asking rate is $5.14 fully serviced per square foot, up slightly from $5.08 a year ago Concar Drive, San Mateo 20% 15% 10% 5% 0% 2,000,000 1,500,000 1,000, ,000 0 Total Vacancy Rate Average Asking Rate (FS) San Mateo County Office vs. Gross Absorption $5.00 $4.00 $3.00 $2.00 $1.00 (500,000) (1,000,000) Gross Absorption Source: Hines.com WeWork continues to grab headlines, as the co-working behemoth closed the largest lease of the quarter in San Mateo County, with their new 95,813 square foot space at Concar Drive in San Mateo. Other noteworthy leases include Apixio s 21,441 square foot sublease in San Mateo, Pure Storage s 31,571 square foot expansion in The Sobrato Organization s new downtown Mountain View project and NatureBox s 10,236 square foot Redwood Shores lease. The strength of the office leasing market on the San Francisco Peninsula continues to defy gravity beyond the expectations of many market observers. Strong demand remains even in the face of record high rents. While leasing in multi-tenant projects in secondary locations has slowed, buildings in core locations and larger blocks of space in all markets remain in strong demand, a condition we expect to continue over the second half of. San Mateo County Office Gross Absorption by Size Range 39.72% 16.52% 16.49% 12.16% 19.89% 3K 3-5K 5-10K 10-20K 20-50K 50K 2 San Francisco Peninsula Research & Forecast Report Colliers International

3 R&D > > Modest decrease in asking rent still reflects a hot market > > Hines purchased a six-building, 379,219 square foot business park The R&D market in San Mateo County shares a similar trend with the industrial market as vacancy remains extremely low, pricing is at historic levels and demand at an all-time high. The primary difference is the growing building base. Nearly a half a million new square feet has been delivered over the past twelve months and significantly more inventory is in the pipeline as we have discussed in reports past. San Mateo County R&D Rent vs. Vacancy 30% 25% 20% 15% 10% 5% $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 With that in mind, the average asking rate for San Mateo County dropped to $3.73 NNN per square foot, per month, but is only a 1.55 percent decrease from last quarter and a 3.60 percent increase from this quarter last year s rate of $3.60 NNN per square foot. The vacancy rate crept up to 2.05 percent, the first jump above 2.00 percent in four quarters, but is still 54 basis points lower than this time last year. Net absorption was negative 200,872 square feet, but we still had 153,495 square feet of positive gross absorption and there is only 21,562 square feet of vacant sublease space on the market. These slight shifts up and down in statistics are minor and do not have a bearing on this extremely hot product type. Clearview Business Park, San Mateo 0% 600, , ,000 Total Vacancy Rate Average Asking Rate (FS) San Mateo County R&D vs. Gross Absorption $ , , ,000 0 (100,000) (200,000) (300,000) (400,000) Gross Absorption Besides the industrial to R&D conversion sales with Kilroy Realty Corporation in South San Francisco and Alexandria Real Estate Equities in San Carlos, discussed in the industrial section, there were a couple other transactions to note. Hines purchased Clearview Business Park at 3055 Clearview Way, the six-building, 379,219 square foot creative office/r&d buildings that house GoPro and Tesla from RREEF Property Trust. Buchanan Street Partners also sold their three-building, 113,500 square foot flex/r&d project at Dubuque Avenue in South San Francisco to PSAI Realty Partners. Both transactions leaned more towards the office side of this sector versus life science and biotech, which tends to be the primary growth segment on the San Francisco Peninsula. Expect continued development in R&D product as this area still holds rank as the biotech capital of the world. San Mateo County R&D Gross Absorption by Size Range 63.59% 2.63% 12.59% 11.70% 9.49% 3K 3-5K 5-10K 10-20K 20-50K 50K 3 San Francisco Peninsula Research & Forecast Report Colliers International

4 Industrial > > Average asking rents continue to soar to historically high rates > > Zume Pizza leased ±40,200 square feet in South San Francisco The industrial market on the San Francisco Peninsula tells the same story again this quarter. Asking rates are at an all-time high, vacancy remains in the percent range, sublease product is not a factor and redevelopment is still an issue for an extremely supply-constrained market. We will dip into the fairly similar numbers each quarter, but will venture more into recent transactions and how they affect the overall market. San Mateo County Industrial Rent vs. Vacancy 12% 10% 8% 6% 4% 2% $1.50 $1.25 $1.00 $0.75 $0.50 $0.25 This quarter slightly eclipsed the highest average asking rate historically, coming in at $1.48 NNN per square foot, per month, just $0.01 higher than last quarter. Vacancy shifted modestly upward to a mere 1.53 percent, three basis points higher than last quarter and sublease vacancy is still a shocking 0.00 percent for the second quarter in a row. The only adverse statistic is a negative net absorption of 11,854 square feet, yet gross absorption was still positive at 444,901 square feet. Deal velocity stalled a bit at 23 industrial deals above 3,000 square feet compared to 27 deals last quarter. While there are indicators that shifted slightly downward, it is easily attributed to a lack of available options in the market, as the movement is insignificant E. Harris Avenue, South San Francisco 0% Total Vacancy Rate Asking Rents (NNN) San Mateo County Industrial vs. Gross Absorption 1,000, ,000 $ , , ,000 0 (200,000) (400,000) Statistics aside, deals that took place this quarter tell the real story. Due to a lack of inventory, there were only two lease deals to note. Yusen Logistics renewed their 41,634 square foot unit at 405 Victory Avenue in South San Francisco from EverWest Real Estate Partners, which has remained their home for many years. Zume Pizza, a new robotic pizza-making company, leased 40,200 square feet at 439 Eccles Avenue in South San Francisco from Allan & Henry, Inc. on a long-term basis. Pacific Gateway Concessions sold their 19,800 square foot facility at E. Harris Avenue to the Flodr Family Trust, which was the most notable owner/user sale this quarter. Besides the lack of inventory, there were two impactful sales that took place. 960 Industrial Avenue in San Carlos, home of L3 Electron Devices, was sold to Alexandria Real Estate Equities for an R&D conversion, taking another 217,000 square feet of industrial product off the market in the ever-shrinking inventory. The other impactful sale was of the Oyster Point Development, a 125-acre, entitled, industrial to R&D conversion, was flipped from Greenland USA to Kilroy Realty Corporation who has made a recent push into the San Francisco Peninsula market. Expect the positive statistical trends and redevelopment to continue down the same path in the foreseeable future. (600,000) Gross Absorption San Mateo County Industrial Gross Absorption by Size Range 55.67% 2.07% 2.17% 7.30% 14.40% 18.39% 3K 3-5K 5-10K 10-20K 20-50K 50K 4 San Francisco Peninsula Research & Forecast Report Colliers International

5 Significant Lease Activity Zume Pizza 439 Eccles Avenue South San Francisco 40,200 - Industrial DALY CITY BRISBANE Yusen Logistics 405 Victory Avenue South San Francisco 41,634 - Industrial SOUTH SAN FRANCISCO SAN BRUNO/ MILLBRAE BURLINGAME SAN FRANCISCO BAY SAN MATEO FOSTER CITY Aerotek 2950 S. Delaware Street San Mateo 31,145 - Office Apixio 1850 Gateway Drive San Mateo 21,441 - Office REDWOOD BELMONT/ SHORES SAN CARLOS WeWork Concar Drive San Mateo 95,813 - Office REDWOOD CITY MENLO PARK Menlo Medical Clinic 1300 Crane Street Menlo Park 38,006 - Office Cornerstone Research 1000 El Camino Real Menlo Park 31,902 - Office Significant Sale Activity PROPERTY ADDRESS SIZE BUYER TYPE 960 Industrial Road, San Carlos 217,000 Alexandria Real Estate Equities Industrial 1000 Marina Boulevard, Brisbane 104,335 Phase 3 Real Estate Partners Office 386 Convention Way, Redwood City 77,972 Bearcat Properties Land 2201 Bay Road, Redwood City 69,844 Si XX, LLC Land 80 Willow Road, Menlo Park 47,065 Integral Communities Office 50 Broderick Road, Burlingame 33,065 The Murphy Trust Industrial E. Harris Avenue, South San Francisco 19,800 Flodr Family Trust Industrial 5 San Francisco Peninsula Research & Forecast Report Colliers International

6 MARKET COMPARISONS OFFICE MARKET CLASS BLDGS TOTAL INVENTORY DIRECT DIRECT SUBLEASE SUBLEASE TOTAL CURRENT QUARTER PRIOR QUARTER CURRENT OCCUPIED CURRENT NET ABSORPTION NET ABSORPTION YTD WEIGHTED AVG ASKING RENTAL (FS) SOUTH PENINSULA* MOUNTAIN VIEW/LOS ALTOS A 58 5,036, , % 18, % 230, % 5.06% 4,805, , ,565 $7.35 B/C 165 2,729,762 53, % 9, % 63, % 4.44% 2,666,353 6,651 72,642 $5.52 Total 223 7,766, , % 28, % 294, % 4.82% 7,472, , ,207 $7.05 PALO ALTO A 132 5,504,740 65, % 6, % 72, % 2.08% 5,432, , ,505 $8.03 B/C 285 6,291,183 56, % 21, % 78, % 2.55% 6,213,092 13,689 33,849 $5.80 Total ,795, , % 28, % 150, % 2.33% 11,645, , ,354 $6.80 SAN MATEO COUNTY MENLO PARK A 50 2,869,922 59, % 1, % 61, % 2.71% 2,808,665 16,499 31,252 $8.71 B/C 133 3,712,822 60, % 5, % 65, % 3.20% 3,646,960 53,031 40,188 $7.48 Total 183 6,582, , % 7, % 127, % 2.99% 6,455,625 69,530 71,440 $8.16 REDWOOD CITY A 32 3,121,745 4, % % 4, % 0.16% 3,116,845 (2,850) 3,400 $4.75 B/C 131 2,275,928 98, % % 98, % 4.33% 2,177, ,205 $5.82 Total 163 5,397, , % % 102, % 1.92% 5,294,752 (2,342) 17,605 $5.12 BELMONT/SAN CARLOS A 14 1,090,032 68, % % 68, % 2.17% 1,021,108 (68,580) (67,960) $4.09 B/C ,579 5, % % 5, % 2.18% 805,381 15,971 16,671 $0.00 Total 71 1,900,611 74, % % 74, % 2.17% 1,826,489 (52,609) (51,289) $4.09 REDWOOD SHORES A 49 5,411, , % 15, % 476, % 8.62% 4,935,008 (10,684) 14,332 $4.88 B/C ,258 32, % % 32, % 10.19% 308,440 1,970 (5,598) $4.62 Total 62 5,753, , % 15, % 509, % 8.71% 5,243,448 (8,714) 8,734 $4.87 SAN MATEO A 38 4,148, , % 5, % 447, % 11.58% 3,701,531 20,233 10,570 $5.25 B/C 178 4,902, , % 142, % 432, % 10.58% 4,470,303 86, ,211 $4.01 Total 216 9,051, , % 147, % 879, % 11.04% 8,171, , ,781 $4.60 FOSTER CITY A 17 3,103, , % 38, % 413, % 13.84% 2,689,689 15,845 (47,322) $5.26 B/C ,804 49, % % 49, % 7.67% 590, ,301 $4.67 Total 47 3,743, , % 38, % 462, % 12.78% 3,280,446 15,845 (46,021) $5.22 BURLINGAME A 8 795,912 78, % 2, % 80, % 12.39% 715,622 18,287 11,740 $5.65 B/C 83 2,084,987 98, % % 98, % 4.63% 1,986,059 (2,380) 18,119 $3.27 Total 91 2,880, , % 2, % 179, % 6.77% 2,701,681 15,907 29,859 $5.49 SAN BRUNO/MILLBRAE A 9 1,159, % 5, % 5, % 0.43% 1,154, ,365 $2.96 B/C ,408 5, % % 5, % 0.84% 649, ,747 $3.24 Total 42 1,814,603 5, % 5, % 10, % 0.58% 1,804, ,112 $3.07 DALY CITY A 3 505,988 95, % % 95, % 18.95% 410, ,353 $3.97 B/C ,450 10, % % 10, % 3.84% 443,502 6,500 7,006 $3.04 Total , , % % 106, % 11.80% 853,596 6,500 9,359 $3.85 SOUTH SAN FRANCISCO A 17 3,079, , % 7, % 188, % 6.77% 2,890,961 19,988 21,467 $5.12 B/C 52 1,189,759 25, % % 25, % 1.94% 1,164,338 (2,366) 5,634 $4.27 Total 69 4,269, , % 7, % 213, % 5.42% 4,055,299 17,622 27,101 $5.08 BRISBANE A 5 667,067 53, % % 53, % 8.04% 613, $3.73 B/C 6 147,303 38, % % 38, % 26.09% 108,876 0 (34,769) $2.80 Total ,370 92, % % 92, % 11.30% 722,341 0 (34,769) $3.46 SAN MATEO COUNTY MARKET TOTAL A ,953,382 1,820, % 75, % 1,896, % 7.53% 24,057,183 8,738 (6,803) $5.31 B/C ,214, , % 147, % 862, % 5.88% 16,352, , ,715 $4.60 Total ,168,349 2,535, % 223, % 2,758, % 6.86% 40,409, , ,912 $5.14 QUARTERLY COMPARISON AND TOTALS ,168,349 2,535, % 223, % 2,758, % 6.86% 40,409, , ,912 $5.14 Q ,161,003 2,702, % 259, % 2,962, % 7.10% 40,198,236 45,686 45,686 $5.18 Q ,007,491 2,599, % 382, % 2,981, % 7.29% 39,025,569 66,431 (377,035) $5.00 Q ,013,770 2,652, % 410, % 3,063, % 6.92% 38,950,273 (271,395) (443,466) $ ,098,630 2,662, % 250, % 2,912, % 7.13% 39,186,167 (87,761) (172,071) $5.08 *THE SOUTH PENINSULA CITIES OF MOUNTAIN VIEW, LOS ALTOS, AND PALO ALTO ARE FOR REFERENCE PURPOSES AS THEY ARE NOT INCLUDED IN THE SAN MATEO COUNTY MARKET TOTALS. 6 San Francisco Peninsula Research & Forecast Report Colliers International

7 MARKET COMPARISONS R&D MARKET BLDGS TOTAL INVENTORY DIRECT DIRECT SUBLEASE SUBLEASE TOTAL CURRENT QUARTER PRIOR QUARTER CURRENT OCCUPIED CURRENT NET ABSORPTION NET ABSORPTION YTD WEIGHTED AVG ASKING RENTAL (NNN) SOUTH PENINSULA* MOUNTAIN VIEW ,041, , % 170, % 366, % 2.26% 13,675,229 (128,851) (128,851) $3.46 PALO ALTO ,679,328 43, % 124, % 168, % 0.53% 13,511,006 77,634 77,634 $6.42 SAN MATEO COUNTY MENLO PARK 75 4,290, , % % 154, % 2.46% 4,136,130 (48,617) (53,496) $4.09 REDWOOD CITY/REDWOOD SHORES 73 2,476,391 12, % 14, % 26, % 0.49% 2,449,757 (14,404) (18,795) $2.67 BELMONT/SAN CARLOS 51 1,705,989 48, % % 48, % 3.04% 1,657,583 3,409 (21,789) $2.99 SAN MATEO/FOSTER CITY 62 1,600, % % % 0.00% 1,600, $0.00 SAN BRUNO/MILLBRAE/BURLINGAME ,485 7, % % 7, % 3.39% 830, (20,207) $1.70 SOUTH SAN FRANCISCO/BRISBANE 107 7,159, , % 7, % 134, % 1.77% 7,025,683 (7,158) (86,585) $4.58 SAN MATEO COUNTY MARKET TOTAL Total ,071, , % 21, % 370, % 1.80% 17,700,658 (66,463) (200,872) $3.73 QUARTERLY COMPARISON AND TOTALS ,071, , % 21, % 370, % 1.80% 17,700,658 (66,463) (200,872) $3.73 Q ,079, , % % 324, % 1.08% 17,754,337 (134,409) (134,409) $3.79 Q ,824, , % % 192, % 1.22% 17,631,627 25,662 82,920 $3.51 Q ,811, , % 24, % 218, % 2.59% 17,593, ,776 57,258 $ ,641, , % 45, % 457, % 2.26% 17,184,158 (95,324) (160,518) $3.60 INDUSTRIAL MARKET SOUTH PENINSULA* MOUNTAIN VIEW 114 1,588,183 64, % % 64, % 2.79% 1,523,391 14,666 (2,933) $3.36 SAN MATEO COUNTY MENLO PARK 81 2,418,610 58, % % 58, % 3.40% 2,360,313 24,000 (20,546) $3.90 REDWOOD CITY 184 4,194,440 35, % % 35, % 1.07% 4,158,594 9,112 64,440 $1.93 BELMONT/SAN CARLOS 233 6,104,593 34, % % 34, % 0.57% 6,070, ,565 $1.93 SAN MATEO/FOSTER CITY 76 1,393,882 74, % % 74, % 5.38% 1,318,956 0 (38,947) $1.50 BURLINGAME 139 3,998,644 72, % % 72, % 3.10% 3,925,730 50,858 (41,763) $1.63 SAN BRUNO/MILLBRAE , % % % 0.00% 678, $0.00 BRISBANE/DALY CITY 104 5,280, , % % 150, % 0.00% 5,129,712 (150,507) (150,507) $0.00 SOUTH SAN FRANCISCO ,323, , % % 175, % 1.50% 15,148,103 54,503 17,054 $1.18 SAN MATEO COUNTY MARKET TOTAL Total 1,231 39,392, , % % 602, % 1.50% 38,790,025 (11,854) (150,704) $1.48 QUARTERLY COMPARISON AND TOTALS -18 1,231 39,392, , % % 602, % 1.50% 38,790,025 (11,854) (150,704) $1.48 Q1-18 1,231 39,436, , % % 590, % 1.11% 38,845,664 (138,850) (138,850) $1.47 Q4-17 1,230 39,318, , % 28, % 435, % 1.64% 38,883, , ,307 $1.42 Q3-17 1,229 39,291, , % 70, % 643, % 1.60% 38,647,635 (24,450) 44,216 $ ,231 39,365, , % 60, % 630, % 1.99% 38,735,530 81,786 68,666 $1.36 *THE SOUTH PENINSULA CITIES OF MOUNTAIN VIEW, LOS ALTOS, AND PALO ALTO ARE FOR REFERENCE PURPOSES AS THEY ARE NOT INCLUDED IN THE SAN MATEO COUNTY MARKET TOTALS. 7 San Francisco Peninsula Research & Forecast Report Colliers International

8 69 countries $2.7 billion in annual revenue 2.0 billion square feet under management MARKET CONTACT: Rick Knauf Executive Managing Director CA License No Nicholas Matera Research Analyst EDITOR & DESIGNER: AngeLin Vu Senior Graphic Designer 15,400 professionals and staff $116 billion in total transaction value CONTRIBUTING AUTHORS: Mike Cobb Senior Vice President Mike Davis, SIOR Senior Vice President COLLIERS INTERNATIONAL REDWOOD CITY 203 Redwood Shores Parkway, Suite 125 Redwood City, CA USA colliers.com/redwoodcity *All statistics are for, are in U.S. dollars and include affiliates. About Colliers International Group Inc. Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 12,000 professionals. Colliers is the fastestgrowing publicly listed global real estate services and investment management company, with corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world s most respected institutional real estate investors. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row. Colliers is led by an experienced leadership team with a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years. For the latest news from Colliers, visit Colliers.com or follow us on and LinkedIn. colliers.com/redwoodcity 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. 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.