National Studley Effect Rent Index

Methodology
Since 1995, the Studley Effective Rent Index (SERI) has been providing the real estate industry’s only
comprehensive, in-depth study of effective rental rate trends and the real cost of occupancy for tenants in the
nation’s major Central Business Districts (CBDs) and selected suburban markets. The SERI report provides
“real world” numbers that reﬂect lease terms, including negotiated rents and concessions, as well as operating
expenses, real estate taxes and electricity costs.

Each year, Studley analysts examine larger long-term direct deals signed in the highest-quality Class A
properties. Total (gross) rent is separated into its key components: net (or base) rent, operating expenses, real
estate taxes and electricity costs. The Tenant Effective Rent Index (the cost of occupancy to the tenant) is
derived from total rent less the value of concessions provided by the landlord. Finally, the Landlord Effective Rent
Index (the landlord’s bottom line) is calculated from total rent less costs incurred by the landlord, which include
expenses, concessions and commissions.

All statistics in this year’s SERI report are based on larger long-term leases completed during 2009 in existing or
newly constructed Class A buildings.

SERI2010
TABLE OF CONTENTS
Summary of Key Findings 1

National Benchmarks 2

Landlord Concessions 4

Tenant Effective Rent 6

Landlord Effective Rent 10

Total Rent Components 14

CBD Rent Trends 24

Suburban Rent Trends 32

Statistical Summary 36

Glossary 37

Supplementary Information 38

Summary of Key Findings
Plunge in Net Rents Resets Market Floor

Effective rents registered their largest single-year correction since the SERI index began, as demand for ofﬁce space in most markets plummeted to its lowest
level in more than a decade. The value of concessions spiked by more than 25% and the decline in net (base) rents reset the starting point for rents in nearly
every market. Net rents plunged by more than 30% in the markets that had the most room for adjustment, such as Manhattan and West Los Angeles. Atlanta,
Chicago, and Tampa Bay posted more moderate declines of less than 10%, but the operating margins were already razor-thin in these markets. Only a few
markets – Denver, Houston, Philadelphia, and Washington, DC – can be accurately described as holding their ground on rents due to less severe conditions.
Although the effective rents of 2009 represent just one year’s worth of transactions, the decline was so extensive that the new starting point for net rents
– the ﬂoor for prime Class A space – has fallen to its levels of 2003 or in some cases of the mid-1990s. The upside was a much lower cost to lease space
– businesses that were able to sign new leases or restructure their current leases were able to lock in generational savings on real estate.
KEY CBD FINDINGS
2009 2008 Markets Markets
2009 2008 Change Change Decreasing Increasing COMMENTS

TOTAL RENT COMPONENTS
The net rent index fell for the second straight year,
Net (Base) Rent Index  ‐ (Page 17) $29.51 $40.34 ‐26.9% ‐6.4% 15 1 posting its steepest annual decrease on record.
Operating expenses registered a very moderate increase
     (Operating Expenses) ‐ (Page 18) $9.86 $9.72 1.5% 3.2% 2 14 compared to prior years.
Real estate taxes rose at a faster pace than operating
     (Real Estate Taxes) ‐ (Page 19) $9.67 $9.32 3.8% 3.4% 2 14 expenses and tenant electric.
The increase in tenant electric was about half that
     (Electricity ) ‐ (Page 20) $2.69 $2.63 2.4% 4.3% 2 14 recorded in 2008.
Total rent posted a record decline, exceeding the 11.1%
Total Rent Index ‐ (Page 21) $51.73 $62.24 ‐16.7% ‐2.9% 14 2 drop in 2002.

Concession packages spiked by more than 25.0%,
     (Concessions) ‐ (Page 4) $91.10 $71.94 26.6% 19.4% 0 16 exceeding last year's jump of nearly 20.0%.

BENCHMARK EFFECTIVE RENT INDEXES
A record jump in concessions combined with
Tenant Effective Rent Index ‐ (Page 6) $38.98 $51.14 ‐23.8% ‐7.0% 0 16 plummeting net rents spurred a decline of nearly 25.0%.

Landlords' bottom line plunged by more than 40.0% in
Landlord Effective Rent Index ‐ (Page 10) $17.11 $29.21 ‐41.4% ‐13.1% 0 16 2009 as they extended generous packages and lowered
net rents.

STUDLEY EFFECTIVE RENT INDEX 2010 1

National Benchmarks
Pivotal Fall in Effective Rents Tenant Landlord
National Benchmarks Comparison Effective Effective

Tenant occupancy costs (the National
Tenant Effective Rent Index) registered the
largest year-on-year decline since the SERI
$60

index started in 1995. Tenant effective rent
decreased by 23.8% during 2009, falling from
$50
$51.14 to $38.98. Tenant effective rent was
about 2.5% below its mark in 2005 ($40.00).

$40

The National Landlord Effective Rent Index
dropped by a record 41.4%, plummeting from
$30
$29.21 in 2008 to $17.11 in 2009.

A sharp drop in net rent, combined with $20

generous concession packages, caused the
decline.
$10

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Tenant Effective Rent $37.63 $45.44 $43.68 $36.73 $35.15 $36.35 $40.00 $46.14 $55.02 $51.14 $38.98
Landlord Effective Rent $21.61 $28.74 $27.33 $19.65 $17.64 $18.06 $20.79 $26.39 $33.63 $29.21 $17.11

2 STUDLEY EFFECTIVE RENT INDEX 2010

SERI2010
Total Rent Dives Operating Real Estate
Total Rent Components Net Rent
Expenses Taxes
Electricity

Total (or gross) rent fell by 16.7% in 2009,
declining from $62.24 to $51.73. Total rent
consists of four components: net (or base)
rent, operating expenses, real estate taxes $70

and electricity.
$60

The sharp drop in net rent was the critical
factor in 2009. Net rent declined for the $50

second straight year, falling by 26.9% to
$29.51. By comparison, net rent decreased $40

by 6.4% in 2008 to $40.34.
$30

Expenses associated with building operations
$20
continued to increase. Real estate taxes
rose by 3.8% to $9.67, slightly more than last
$10
year’s growth of 3.3%. Electricity posted a
more moderate gain than in recent years,
$0
inching up by 2.4% to $2.69. Operating 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net Rent $29.54 $36.66 $33.18 $26.94 $25.58 $26.01 $28.43 $33.97 $43.11 $40.34 $29.51
expenses recorded the most modest rise, of
Operating Expenses $6.78 $7.01 $7.26 $7.54 $7.84 $8.13 $8.22 $8.59 $9.42 $9.72 $9.86
1.5% from $9.72 to $9.86. Real Estate Taxes $5.62 $5.71 $5.82 $6.42 $6.74 $7.23 $7.84 $8.09 $9.02 $9.32 $9.67
Electricity $1.73 $1.84 $1.87 $1.91 $1.94 $2.00 $2.20 $2.33 $2.52 $2.63 $2.69

Total Rent $43.67 $51.22 $48.14 $42.81 $42.09 $43.37 $46.68 $53.01 $64.07 $62.24 $51.73


Landlord Concessions
Fire Sale Concessions
Tenant Concessions: Market Comparison 2008 2009
The value of concession packages has
increased in every year since 2006, with
double-digit spikes in each of the last
two years. In prior years, the increase
was caused in part by the growth in
$140
rental rates that in turn inﬂated the value
of the packages. In 2009, the value of
concession packages spiked by a record
$120
26.6% from $71.94 to $91.10, in spite
of steep declines in net rent. Landlords
went to great lengths in most markets to $100
get leases completed. In some markets,
though, the depletion of reserves and
the inability to secure funding kept tenant $80
improvement dollars in check, forcing
many landlords to offer expanded free rent
periods instead. $60

The value of concession packages
reached record levels in 2009 in all but $40
four markets as landlords scrambled to
jumpstart waning demand. Every market
except Philadelphia (up by only 7.1%) $20
posted a double-digit increase in the value
of concession packages. Values pushed
above $100 in four markets: Chicago $0
SAN
(+16.7% to $105.00); Atlanta (+18.2% to WDC MTNY ATL CHI DTNY MIA TAM DEN HOU NJ
FRAN
DT LA DAL WLA SDO PHI

$105.00); Midtown Manhattan (+22.3% to 2008 $70.00 $94.00 $88.86 $90.00 $78.00 $42.50 $55.88 $53.75 $37.50 $50.00 $45.00 $50.00 $44.00 $45.00 $29.00 $42.00
$115.00) and Washington, DC (+87.1% 2009 $131.00 $115.00 $105.00 $105.00 $92.84 $65.85 $64.12 $62.04 $58.56 $57.50 $57.04 $55.00 $51.34 $50.00 $47.00 $45.00

to $131.00). The increase in concession
packages in Washington, in contrast
to that in the other markets, was not


SERI2010
accompanied by a significant decrease in Lowest
net rents. Landlords in the nation’s capital National Highest
Value of Amortized Concessions Average (Chicago)
(San
chose to lure tenants with record-setting Francisco)
concessions including generous build-
outs, but held their ground on base rents.

Amortized concessions as a percentage of
gross rent provide a more precise gauge
of the dramatic spike in the true value of
packages. The 16.7% decline in gross
rents combined with the 26.6% increase
40%
in concessions pushed the ratio of
concession packages to initial year’s rent 35%
from 17.1% in 2008 to 24.3% in 2009, well
above the peak ratio of 20.1% in 2003. 30%
Washington, DC (+11.5 pp) and Miami
25%
(+13.0 pp) registered the largest year-
on-year increases in concessions as a 20%
percentage of initial year rent. In contrast,
this percentage rose more moderately in 15%
Downtown Los Angeles (+1.3 pp) and San 10%
Francisco (+2.2 pp).
5%
Tenants were also able to negotiate other
substantial incentives not quantified in the 0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
value of concession packages. These National 13.8% 11.3% 14.2% 18.7% 20.1% 19.5% 17.9% 15.7% 13.9% 17.1% 24.3%
ranged from cancellation options and San Francisco (Low) 6.2% 3.4% 8.0% 21.0% 21.0% 20.4% 18.2% 16.8% 11.2% 13.9% 16.0%
offset rights to flexibility on moving and Chicago (High) 15.7% 20.0% 26.1% 31.1% 31.6% 33.5% 36.9% 34.5% 28.1% 34.1% 38.0%

cabling allowance. Other companies
gained building signage. The most notable
Amortized value of concession package/initial year's gross rent
instance was Willis Group’s lease that
resulted in the renaming of Chicago’s
iconic Sears Tower.


Tenant Effective Rent
Occupancy Costs Dive National
Tenant Effective Rent Market Comparison Median
2008 2009

Tenant effective rent, the cost of
occupancy for ﬁrms, declined by
23.8% in 2009, falling to $38.98. $90
$85
$80
In markets such as Manhattan,
$75
the steep drop was due to $70
generous concession packages $65

and a record cut in net rents. In $60
$55
2008, the $100 mark was the $50
starting point for negotiations $45
in Midtown Manhattan, but this $40
$35
dropped to the $60.00-$70.00
$30
range by midyear 2009. Even $25
with these ﬂuctuations, few $20
$15
markets changed positions from
$10
a year ago – Midtown Manhattan $5
remained the most costly for $0
SAN
MTNY WDC WLA DTNY HOU DTLA MIA SDO NJ CHI PHI DAL DEN TAM ATL
FRAN
tenants, and Atlanta was once
2008 $82.95 $54.64 $49.79 $45.21 $45.77 $34.93 $29.33 $37.71 $37.71 $25.60 $25.68 $23.12 $28.59 $19.74 $18.73 $17.94
again the least expensive. 2009 $49.62 $47.92 $46.06 $33.46 $32.00 $29.04 $27.85 $26.01 $24.54 $23.95 $23.66 $22.69 $22.30 $19.50 $17.65 $16.04


SERI2010
Index Falls By Nearly 25%
Tenant Effective Rent Trends: Year-on-Year Change
The 23.8% decline in tenant
effective rent during 2009
exceeded the 15.9% drop in
2002, which had been the largest
year-on-year decrease. Tenant 10-Year Average: +0.4%
effective rent has now fallen by 25%

29.2% from its peak of $55.02 in 20%
2007. During the last recession,
15%
tenant effective rent fell by a total
Cumulative decline:
of 22.7%, from $45.44 in 2000 to 10% -22.7%
$35.15 in 2003. 5%

0%
Tenant occupancy costs will
decline further in 2010, but the -5%

decreases will probably be in the -10%
5% to 10% range rather than the
-15% Cumulative
extreme drops seen during 2009. decline: -29.2%
An additional 10.0% decrease -20%

would push tenant occupancy -25%
costs just below their mark in
-30%
2003. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Annual Change 5.8% 20.8% -3.9% -15.9% -4.3% 3.4% 10.0% 15.3% 19.2% -7.0% -23.8%


Tenant Effective Rent by Market
Tenant Occupancy Costs Decline Across the Board

Tenant occupancy costs declined in every market, with decreases of at least 10% in nine of the 16 markets. Tenant
effective rent fell by more than 25% in five markets, with the steepest drops occurring in Miami (-31.0%), San
Diego (-34.9%) and both Manhattan submarkets (-40.2% in Midtown and -30.1% Downtown).

In ten of the markets, tenant effective rents fell at a much more moderate rate of less than 20.0%. In four of
these markets – Denver (-1.2%), Philadelphia (-1.8%), Washington, DC (-12.3%) and Houston (-16.9%) – the
relative stability can be attributed to healthier demand or more limited supply of quality product. Denver’s and
Philadelphia’s CBDs, for example, both have a smaller supply of premiere product, and compared to other
markets, the recession did not hit either of these markets as hard in terms of layoffs. Sublet supply consequently
increased but not to the extent seen in Los Angeles, Chicago or Manhattan.

On the other hand, in markets such as Tampa Bay (-5.8%), New Jersey (-6.5%), Chicago (-7.9%) and
Atlanta (-10.9%), tenant effective rent was already well below the national average headed into 2009. These
markets had already experienced rent deflation during 2007 and 2008, and landlords had little margin left to
squeeze out lower net rents or increase concessions. In Atlanta, for example, tenant effective rent was just below
$18.00 in 2008 – the lowest it had been on a non-inflation adjusted basis since the mid-1990s. This rate fell to
$16.04 in 2009.


SERI2010

Tenant Effective Rent: Year-on-Year Change by Market

Denver -1.2%

Philadelphia -1.8%

Downtown LA -5.1%

Tampa Bay -5.8%

New Jersey -6.5%

San Francisco -7.5%

Chicago -7.9%

Atlanta -10.6%

Washington, DC -12.3%

Houston -16.9%

Dallas -22.0%

West LA -26.0%

Manhattan (DT) -30.1%

Miami -31.0%

San Diego -34.9%

Manhattan (MT) -40.2%

-45% -40% -35% -30% -25% -20% -15% -10% -5% 0%


Landlord Effective Rent
Decline Exceeds 40% National
Landlord Effective Rent Market Comparison Median
2008 2009

Landlord effective rents fell by
13.1% in 2008. This was just the
cusp of the collapse; the landlord $60

effective rent index dove by
41.4% to $17.11 in 2009. $50
For the ﬁrst time since 2003,
Midtown Manhattan was
$40
pushed off the top of the scale,
supplanted by San Francisco and
Washington, DC. The median $30

landlord effective rent (San
Diego) fell from $23.88 to $11.76
$20
in 2009, and the highest landlord
effective rent (San Francisco,
$28.60) fell below $30.00 for the $10

ﬁrst time since 2004. Chicago
and Atlanta were in the bottom
$0
SAN
two positions for the second FRAN
WDC MTNY HOU WLA DTLA MIA SDO NJ DAL DTNY DEN PHI TAM CHI ATL

2008 $32.12 $27.85 $52.44 $23.19 $29.12 $15.03 $22.72 $23.88 $11.68 $16.30 $23.83 $9.73 $8.28 $7.39 $6.31 $5.62
straight year. 2009 $28.60 $21.09 $19.57 $17.70 $17.49 $13.40 $12.25 $11.76 $10.16 $10.10 $9.99 $9.15 $7.68 $6.61 $4.09 $3.65


SERI2010
Concentrated Collapse
Landlord Effective Rent Trends: Year-on-Year Change

It took three years in the last
downturn for landlord effective
rents to fall by 38.6% from peak
to trough. Landlord effective 10-Year Average: -2.3%
40%
rents have fallen by nearly 50.0%
from their peak rate of $33.63 in 30%
2007. The bulk of this correction Cumulative decline: -38.6%
20%
occurred over four quarters from
late 2008 to midyear 2009. The 10%

nosedive of nearly 42.0% in 0%
landlord effective rents during
-10%
2009 pushed the index down
to just above the $16.06 rate -20%
Cumulative
recorded in 1997. Difficulty in -30% decline:
-49.1%
securing capital and the number
-40%
of properties with approaching
financial commitments make the -50% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
contraction in cash flow much Annual Change 10.6% 33.0% -4.9% -28.1% -10.2% 2.3% 15.1% 26.9% 27.4% -13.1% -41.5%

more problematic in this cycle.


Landlord Effective Rent by Market
Pervasive Cut in Landlord Effective Rent

As the recession first emerged in 2008, landlords held their ground on rents, initially increasing concession
packages instead. By early 2009, though, with demand at record lows and sublet supply flooding the market
(particularly in the top-tier Class A properties that had pushed rents to record highs in 2007), landlords had to
make sharp adjustments to net rents as well. During 2009, landlord effective rent fell by double digits in every
market except Denver (-6.0%) and Philadelphia (-7.2%). Tenants willing to sign deals in 2009 came to the table
anticipating substantial discounts in rents as well as generous incentives.

Landlord effective rent fell by more than 40% in four markets including Miami (-46.1%), San Diego (-50.8%), and
both Manhattan markets (-58.1% in Downtown and -62.7% in Midtown) Even markets that had headed into 2009
with scant landlord effective rents of less than $10.00 suffered additional haircuts to margins. Atlanta’s landlord
effective rent dropped by 35.1% to $3.65 and Chicago’s landlord effective rent fell by 35.2% to $4.09.

Some landlords agreed to lease terms that worked out to negative cash flow in initial years.The SERI index only
tracks direct transactions, but the flood of sublet space and the highly favorable terms granted by many sub-
lessors set a new standard for how low rents could go, putting significant pressure on all property owners to
follow suit. Many leases signed for quality sublet space included high-end installations and a lengthy remaining
term. Some sub-lessors, many in the financial sector, adopted a lease-at-all-costs approach to unloading
space. Landlords with the capacity to take a cut in their bottom line made aggressive moves, while others were
handcuffed by financial obligations, pro forma rent goals or depleted reserves that prevented them from lowering
rents or extending competitive concession packages. Other property owners signed shorter-term leases, hoping to
fill the space for a while and then sign for more profitable terms once the market recovers in two to three years.

SERI2010

Landlord Effective Rent: Year-on-Year Change by Market

Denver -6.0%

Philadelphia -7.2%

Tampa Bay -10.5%

Downtown LA -10.9%

San Francisco -11.0%

New Jersey -13.0%

Houston -23.7%

Washington, DC -24.3%

Atlanta -35.1%

Chicago -35.2%

Dallas -38.0%

West LA -39.9%

Miami -46.1%

San Diego -50.8%



-70% -60% -50% -40% -30% -20% -10% 0%


Total Rent Components
Base Rents Plummet

Total (or gross) rent consists of four components: net (or base) rent, operating expenses, real estate taxes and electricity. Of these four
components, net rent as a percentage of total rent plummeted from 64.8% in 2008 to 57.0% in 2009. This was the ﬁrst time since the
SERI index started in 1995 that net rent’s share fell below 60.0%. With the steep decline in net rent, the proportionate share of other
components of total rent increased. Operating expenses rose from a 15.6% share in 2008 to 19.1% in 2009. Real estate taxes surged
to a new peak, increasing to 18.7%. Electricity as a percentage of total rent hit its highest mark as well, rising to 5.2% and surpassing
the prior peak of 4.9% in 1996.

Net Operating Real Estate
National Rent Components Rent Expenses Taxes
Electricity

Rent Components - 2008 Rent Components - 2009
Elec. Elec.
4.3% 5.2%
Taxes
15.3% Taxes
18.7%

Net (Base) Rent
Op. Ex 57.0%
Net (Base) Rent
15.6%
64.8%

Op. Ex
19.1%


SERI2010
Net Rent as a Percentage
Net Rent as a Percentage of Total Rent
of Total Rent

Net (or base) rent is the largest and
most critical component of total rent.
80.0%
At its peak in 2000 just before the
dotcom bust, net rent represented
nearly 72.0% of total (gross) rent. This 70.0%

level decreased to 57.0% in 2009.
60.0%

The cost of operating a property
accounted for more than 40% of the 50.0%
initial year’s gross rent. In short, even
before concessions are factored
40.0%
in, operating margins for properties
contracted sharply during 2009.
30.0%

20.0%

10.0%

0.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net Rent 67.7% 71.6% 68.9% 62.9% 60.8% 60.0% 60.9% 64.1% 67.3% 64.8% 57.0%


Net Rent Trimmed
Net Rent as Percentage of Total Rent 2008 2009

The nation’s most expensive markets
posted the sharpest declines in net
rent’s share of total rent. Net rent’s
80%
share in Downtown Manhattan was the
lowest in the nation, plummeting from
60.3% a year ago to 47.4% in 2009.
Other markets with net rent shares well 70%

below the national average included
Chicago (49.5%, down from 51.3%)
and Midtown Manhattan (51.8%, down
60%
from 68.6% a year ago). Tampa Bay and
Washington, DC were the exceptions
to the rule posting meager increases of
0.2 pp (to 58.5%) and 0.6 pp (to 59.1%), 50%

respectively.

40%
SAN
HOU ATL DEN WLA WDC NJ TAMP DTLA SDO PHI DAL MIA MTNY CHI DTNY
FRAN
2008 70.8% 68.1% 64.1% 63.0% 69.2% 58.5% 60.0% 58.3% 59.9% 66.2% 55.0% 63.6% 61.4% 68.6% 51.3% 60.3%
2009 69.1% 66.0% 63.1% 62.7% 59.3% 59.1% 58.5% 58.5% 57.8% 56.7% 53.6% 53.0% 52.0% 51.8% 49.5% 47.4%


SERI2010
Net Rent Dives to 2005 National
Levels Net Rent Comparison Median
2008 2009

The National Net Rent index declined
by 26.9%, falling from $40.34 in 2008 to $80

$29.51. Net rent ended 2009 just above $75

its 2005 level ($28.43). Net rent fell in $70

all markets except Washington, DC and $65

Denver. The sharpest declines occurred $60

in markets that attained record rents in $55

2007. Net rent in Midtown Manhattan $50

plummeted by 48.9% from $66.47 to $45

$33.95, followed closely by Downtown $40

Manhattan (-38.5% to $21.26), San $35

Diego (-33.1% to $19.23) and Dallas (- $30
26.1% to $16.50). In both Washington, $25
DC and Denver, several new properties,
$20
plus the effort by landlords to extend
$15
generous concessions rather than
$10
lowering rents, contributed to modest
$5
increases in net rent of 2.6% and 2.8%,
$0
SAN
respectively. WDC
FRAN
MTNY HOU WLA DTNY DTLA ATL SDO CHI NJ MIA DEN DAL PHI TAM

2008 $38.00 $39.34 $66.47 $28.65 $35.89 $34.55 $22.00 $19.93 $28.75 $20.00 $19.80 $27.00 $17.99 $22.33 $16.13 $15.75
2009 $39.00 $36.20 $33.95 $25.82 $23.92 $21.26 $20.50 $19.25 $19.23 $18.90 $18.65 $18.60 $18.50 $16.50 $15.50 $15.50


Moderate Up-tick in National
Operating Expenses Operating Expense Comparison Median
2008 2009

Of the three expense indexes, the
National Operating Expense Index $14
registered the smallest annual increase
in 2009, posting a modest 1.5% rise from
$9.72 to $9.86. $12

Most markets recorded minor up-ticks
$10
in operating expenses. Chicago and
Philadelphia both registered increases of
1.2%, for example, and Downtown Los $8
Angeles’ operating expenses rose by
1.6%.
$6

Miami (down by 11.6%) was the only
market to register a large decline. In $4
contrast, operating expenses rose
signiﬁcantly in Houston (+6.6%).
$2

Operating expenses should moderate
further in 2010. $0
SAN
MTNY DTNY DTLA WLA WDC MIA NJ CHI PHI DAL SDO DEN ATL HOU TAM
FRAN
2008 $11.76 $10.85 $9.44 $9.15 $8.90 $9.00 $10.00 $8.32 $8.25 $8.10 $7.55 $8.10 $6.57 $6.07 $5.43 $5.50
2009 $11.95 $11.10 $9.42 $9.30 $9.16 $9.00 $8.84 $8.38 $8.35 $8.20 $7.75 $7.00 $6.75 $6.30 $5.79 $5.50


SERI2010
Real Estate Taxes Continue National
Ascent Real Estate Tax Comparison Median
2008 2009

Real estate taxes once again posted the
largest annual jump among the expense $18
indexes, rising by 3.8% to $9.67. The
year-on-year increase was slightly higher $16
than in 2008, when taxes jumped by
3.4%. $14

Real estate taxes increased by 3.1% in $12
Dallas and spiked by 19.1% in Miami.
Tampa Bay (-7.7%) and Houston $10
(-14.4%) posted the only notable
declines. $8

Taxes should start to lose some $6
momentum, and in fact decline, in many
markets during 2010 as they are ﬁnally $4
impacted by reduced property values.
This period of declining assessments
$2
could be brief, though – commercial
property will be a tempting target as
$0
SAN
many municipalities deal with revenue MTNY WDC CHI DTNY
FRAN
MIA WLA SDO DTLA ATL HOU NJ PHI TAM DAL DEN

shortfalls in the coming years. 2008 $15.23 $15.00 $9.25 $8.66 $6.23 $4.50 $4.95 $3.90 $3.59 $3.59 $4.03 $3.25 $3.10 $3.25 $2.55 $2.38
2009 $16.04 $15.00 $9.35 $9.05 $6.28 $5.36 $5.09 $4.40 $3.65 $3.48 $3.45 $3.14 $3.10 $3.00 $2.63 $2.55


Electricity Costs Inch Up National
Electricity Cost Comparison Median
2008 2009

Tenant electricity registered a smaller
increase than in prior years, growing
by 2.4% from $2.63 to $2.69. Tenant
$3.50
electricity was ﬂat or rose minimally
in most markets, inching up by 3.3%
in Chicago and 4.4% in Midtown $3.00

Manhattan. Miami, where the rate
jumped by 18.0%, registered the $2.50

largest increase. Dallas and Houston
posted the largest declines (-6.4% $2.00
and -13.1%, respectively).
$1.50
Reduced demand and relatively
stable fuel costs prevailed in 2009
$1.00
and should continue in 2010.

$0.50

$0.00
SAN
MTNY DTNY WDC MIA SDO DAL TAM WLA PHI HOU DTLA NJ DEN CHI ATL
FRAN
2008 $3.40 $3.25 $3.00 $2.79 $2.50 $2.67 $2.67 $2.50 $2.13 $2.00 $2.37 $1.99 $1.63 $1.60 $1.50 $1.50
2009 $3.55 $3.40 $3.00 $2.96 $2.95 $2.75 $2.50 $2.50 $2.19 $2.10 $2.06 $1.99 $1.71 $1.70 $1.55 $1.50


SERI2010
Record Decline in Total Rent National
Total Rent Market Comparison Median
2008 2009

Total (gross) rent dropped by 16.7%
in 2009, decreasing from $62.24
during the prior year to $51.73. $110
$105
$100
It fell in every market with the $95
exception of Washington, DC $90
(+1.5%) and Denver (+3.4%). New $85
$80
construction and stronger demand
$75
in both of these markets were key $70
factors in the small increase in total $65
rents. $60
$55
$50
Of note, gross rent in Washington, $45
DC ($66.00) nudged just past the $40

rate of $65.49 in Midtown Manhattan $35
$30
as the $30 gap between Midtown $25
Manhattan and Washington, DC $20
that had prevailed in 2007 and 2008 $15
$10
evaporated in 2009.
$5
$0
SAN
WDC MTNY DTNY WLA CHI HOU MIA DTLA SDO NJ ATL DEN DAL PHI TAM
FRAN
2008 $65.00 $96.86 $57.80 $57.31 $51.87 $39.00 $40.48 $44.00 $36.73 $43.42 $33.00 $31.09 $28.54 $35.10 $29.33 $27.00
2009 $66.00 $65.49 $54.86 $44.81 $40.36 $38.15 $37.12 $35.75 $35.44 $33.38 $31.88 $30.53 $29.50 $29.38 $28.90 $26.50


Declines in Nearly
Total Rent: Year-on-Year Change by Market
Every Market

In 2008, total rents fell in about
half of the major CBDs and rose Denver 3.4%

slightly in the other half. Total rents Washington, DC 1.5%

posted minor increases in two Philadelphia -1.5%

-1.8%
markets during 2009 and fell in all Atlanta

-1.9%
others. Tampa Bay

Chicago -2.2%

Total rent dropped by more than New Jersey -3.4%

20% in four markets as landords Downtown LA -3.5%

were forced to extend more San Francisco -5.1%

Houston -8.3%
generous concessions while
Dallas -16.3%
lowering net rents. A decline of
Miami -18.8%
nearly 30% in net rent offset minor
increases in operating expenses
West LA -22.2%
and tenant electric as well as
San Diego -23.1%
continued growth in real estate
taxes.
-35% -30% -25% -20% -15% -10% -5% 0% 5%


SERI2010
Growth In Taxes Outpaces Operating Real Estate
Expense and Occupancy Cost Trends Electricity
Other Expenses Expenses Taxes

With the exception of real estate taxes,
all expenses registered more moderate 14.0
Taxes 10-Year Average: +5.6%

increases than in the prior year. The 12.0 Elec 10-Year Average:
+4.5%
order of annual increase among the
10.0
expense indexes followed the pattern
established in 2008; real estate taxes 8.0

recorded the steepest rise (up by 3.8% 6.0
in 2009, compared to 3.4% in 2008),
4.0
followed by tenant electricity (up by 2.4%
in 2009, compared to 4.3% in 2008), and 2.0
operating expenses (up by only 1.5% Op. Ex 10-Year Average:
0.0
in 2009, compared to 3.2% in 2008). +3.8%

Over the last ten years, real estate taxes ‐2.0

have increased at a faster rate (5.6%) ‐4.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
than electricity (4.5%) and operating Operating Expenses (3.8%) 1.0 3.4 3.7 3.8 3.9 3.8 1.1 4.6 9.6 3.2 1.4
Real Estate Taxes (5.6%) ‐2.2 1.7 2.0 10.2 5.0 7.3 8.5 3.2 11.4 3.4 3.8
expenses (3.8%).
Electricity (4.5%) ‐0.8 6.7 1.5 2.3 1.4 3.2 9.7 6.0 8.1 4.3 2.4


CBD Rent Trends
Atlanta Total Tenant Landlord
Atlanta Rent Trends Rent Effective Effective
For the ﬁrst time in ﬁve years, total
rent fell.The 1.8% decline to $30.53 $35
can be attributed to decreases in both 31.09 30.53
$30 29.35 29.90
real estate taxes (-3.1%) and net rent 27.74
26.79
26.05
(-3.4%). On a yearly comparison, $25 24.01
25.58
24.94
24.04
22.69
concession package values soared 22.35 22.35 21.88
20.79 21.08
$20 20.31 20.28
19.60
by 18.2% to $105.00. Tenant effective 17.94

rent continued to drop, falling by 10.6% $15
16.04

to $16.04. Landlord effective rent 12.01 11.95 11.57
10.81 11.25
10.29 10.48
plummeted by a staggering 35.1% from $10 9.91
8.23
2009 to $3.65. $5 5.62
3.65

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Chicago Total Tenant Landlord
Chicago Rent Trends Rent Effective Effective
Total rent slipped for the second
consecutive year, falling by 2.2% to $45
$45
$38.15. Net rent dropped by 5.5%. In $40
42.11
$40 38.25 37.73 39.00
contrast, real estate taxes (+1.1%), $35
37.50
37.73 37.05 37.38
37.39 38.59
37.05 37.38
35.63 35.15
38.15
35.35
35.63 35.35 36.10
$35 35.15
operating expenses (+1.2%) and $30
32.00 31.47 31.81
29.65
31.81 28.66 27.61
electricity (+3.3%) all recorded gains. $30
$25
29.65 26.50
24.92
30.27
24.53
27.61 23.50 24.05 23.52
The value of concession packages rose $25
$20
22.70
21.38
24.53
22.47
24.05
22.00 25.27 25.68
23.52 23.66
22.78
by 16.7% to $105.00. Tenant effective $15
$20
17.20
16.10
15.07
17.52
14.21 14.21
13.18
rent decreased by 7.9% to $23.66. $10 15.71
11.73
9.36
$15 8.33
Landlord effective rent posted a dramatic $5
6.26 13.26
4.97
6.03 5.28
10.89 10.86 4.29
decline of 35.2% to $4.09. $10
$0
1.33
7.56
(0.27)
0.73
(1.47) 6.84 6.22 6.31
(3.19) 5.85
$5 4.22 4.09
($5)
$0
($10)
1999
1990 2000
1991 1992 2001
1993 2002 1995 2003
1994 1996 2004
1997 2005
1998 1999 2006
2000 20072002 2008
2001 2003 2009
2004


SERI2010
Dallas Total Tenant Landlord
Dallas Rent Trends Rent Effective Effective
Total rent plummeted during 2009,
falling by 16.3% to $29.38. Electricity $40
decreased by 6.4% for the year, while $35 35.10
net rent plunged by 26.1%. On the other 31.69
hand, operating expenses increased $30 29.38
28.59
27.00 27.52
26.25 26.50
by 2.6% and real estate taxes rose by $25 24.03
24.78
26.10
23.88
25.67
24.75
26.00
24.19
25.77

22.80
3.1%. The value of concession packages 21.97
20.61
22.30 22.30
$20
continued trending up, rising by 16.7%
16.30
to $51.34. Tenant effective rent recorded $15 14.26 14.81
13.48
14.39

a signiﬁcant drop of 22.0% to $22.30. $10
11.28
10.11
10.92 11.16 11.21
10.10

Landlord effective rent declined even
$5
more substantially, by 38.0% to $10.10.
$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Denver Total Tenant Landlord
Denver Rent Trends Rent Effective Effective
Total rent grew from $28.54 to $29.50,
an increase of 3.4%. All components of $40
total rent rose for the year – operating
$35
expenses by 2.7%, net rent by 2.8%,
31.75
electricity by 6.2% and real estate taxes $30 29.35
28.54 28.54
29.50
27.58 27.56
by 7.1%. The value of concession 25.00
$25 23.95 24.08 24.55
packages soared by 15.4% to $62.04. 22.19
22.97 23.16 23.12
21.35
Tenant effective rent fell for the second $20 19.74 19.50
18.25
16.71
straight year, decreasing by 1.2% to $15 14.63
15.89
14.44 14.40 14.69 14.54
$19.50. Landlord effective rent also 11.54
$10 9.73 9.15
declined, by 6.0% to $9.15. 6.51
7.78
8.69
5.87
$5

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


CBD Rent Trends
Houston Total Tenant Landlord
Houston Rent Trends Rent Effective Effective
Total rent recorded a decline for the
ﬁrst time since 2005, falling by 8.3% to $45
$37.12. Net rent, real estate taxes and 40.48
$40 39.75
electricity decreased by 9.9%, 14.4% 37.12
$35 35.43 34.93
and 13.1%, respectively. In contrast,
operating expenses increased for the $30 29.04
27.27
third straight year (+6.6%). The value of $25 25.53
23.31
25.42 25.65 25.62
23.72
22.69 23.10 23.19
concession packages, $58.56, surged $20 19.40
20.75 21.00 20.37 20.68

by 56.2%. Tenant effective rent dropped 15.21
16.80 16.31 15.82 15.19
17.70
$15
by 16.9% to $29.04. Landlord effective 13.24
11.67
$10 9.95
rent fell even more markedly, by 23.7% 6.91 6.15 5.52
to $17.70. $5

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Downtown Los Angeles Total Tenant Landlord
Downtown Los Angeles Rent Trends Rent Effective Effective
Total rent fell for the ﬁrst time in more
than a decade, slipping by 3.5% to $45
$35.44. Net rent declined by 6.8%.
$40
Operating expenses increased by 1.6% 36.73
$35 35.47 35.44
and real estate taxes grew by 1.7%. 32.25
34.18
31.15 31.76
Tenant electric was unchanged. The $30
28.41
29.65
28.52
29.33
27.56 27.23 27.85
26.83
value of concession packages continued $25 24.49 24.95 25.30
22.99
to rise, by 10.0% to $55.00. Reversing 20.90
21.75
$20 19.88
an upward trend, tenant effective rent
$15 14.54 14.99 15.03
decreased by 5.1% to $27.85. Landlord 11.79 11.89
13.12 13.45 13.53 13.40
11.33
10.51
effective rent plunged by 10.9% to $10
$13.40, likewise reversing its trend. $5

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


SERI2010
West Los Angeles Total Tenant Landlord
West Los Angeles Rent Trends Rent Effective Effective
Following ﬁve consecutive years of
increase, total rent dropped by 22.2% $60
to $40.36. Net rent registered a sharp
51.87
decline of 33.4%. Real estate taxes $50 48.12
grew by 2.8%, electricity by 2.8% and 42.43 42.20
45.21

$40 40.36
operating expenses by 2.9%. The value 37.78 37.13 36.81
36.00
of concession packages continued to 31.86 31.21
34.20
32.40
31.20 32.17
33.46
$30 30.38
29.12
rise, by 11.1% to $50.00. Reversing 27.99
26.55
25.00 25.07
23.80
an upward trend, tenant effective rent 21.28 20.59
23.09
$20 18.67
decreased by 26.0% to $33.46. Landlord 17.42
14.50
17.49

12.98 13.87
effective rent plunged by 39.9% to $10
$17.49, likewise reversing its trend.
$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Miami Total Tenant Landlord
Miami Rent Trends Rent Effective Effective
Total rent fell for the second straight
year, dropping to $35.75. The 18.8% $60
decline can be attributed to decreases
in operating expenses (-11.6%) and $50
particularly net rent (-31.1%). On a yearly 45.00 44.00

$40 40.50
comparison, concession package values 39.45
37.71
34.75 35.50 35.32 35.75
soared by 54.9% to $65.85. Tenant 31.25
34.00
31.04 30.76
32.50 33.00 34.00

$30 30.32
effective rent continued to drop, falling by 28.44
26.58 25.60
28.82
25.36 26.01
31.0% to $26.01. Landlord effective rent 22.00 22.72
$20 19.59 19.01 18.78
plummeted by a staggering 46.1% to 17.89
14.72
17.37
14.21
$12.25. $10
12.25

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


CBD Rent Trends
Manhattan (Downtown) Manhattan (Downtown) Rent Trends Total Tenant Landlord
Rent Effective Effective
Total rent recorded a second year of
decline (-21.8% to 44.81), primarily due $70
to a 38.5% drop in net rent. Operating
61.55
expenses (+2.3%), real estate taxes $60
57.31

(+4.5%) and electricity (+4.6%) all rose $50 50.04
51.95
50.31
during 2009. The value of concession 43.76
45.77 44.81
42.65 42.50
41.34 40.95 40.85
packages rose for the fourth consecutive $40 39.17
40.60
35.77
year, increasing by 19.0% to $92.84. 32.76 32.37 32.00
$30 29.78 28.95 29.85 28.93
Tenant effective rent, $32.00, fell by 25.96
23.83
30.1% year-on-year. Landlord effective $20 18.90
20.70
16.88
rent plummeted, by 58.1% to $9.99. 14.35
11.58 10.59 10.99
$10 9.99

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Manhattan (Midtown) Total Tenant Landlord
Manhattan (Midtown) Rent Trends Rent Effective Effective
Total rent recorded a second year of
decline (-32.4% to 65.49). This decrease $120
is attributable to a 48.9% drop in net
104.55
rent. Operating expenses (+1.6%), $100 96.86
94.34
electricity (+4.4%) and real estate taxes 90.05
82.95
(+5.3%) all rose for the year. The value $80
74.00 74.54 75.42
80.06

of concession packages posted a fourth 66.61 65.66 64.00 63.10
66.27 65.06 64.06 65.49
$60 60.26
year of growth, increasing by 22.3% to 51.38
53.72 55.17
52.44
51.26 51.26 49.62
$115.00. Tenant effective rent, $49.62, 45.88 44.38
$40 37.33
fell by 40.2% year-on-year. Landlord 31.76 30.86 28.78
26.44
effective rent decreased even more $20 19.57
dramatically, by 62.7% to $19.57.
$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


SERI2010
New Jersey Total Tenant Landlord
New Jersey Rent Effective Effective
Total rent fell by 3.4% to $31.88. This
decrease is attributable to a 3.4% decline $45
in real estate taxes and a 5.8% drop in
$40
net rent. Operating expenses (+0.7%)
35.94
and electricity (+4.9%) increased for the $35 34.50
33.60
33.50 32.98 33.00
32.49 32.66 31.88
31.54 31.60 31.78
year. The value of concession packages $30 30.54 30.64 30.50
28.05
27.90 27.34 27.48
26.80
posted a third year of growth, increasing $25 25.60
23.95
by 15.0% to $57.50. Tenant effective 21.40
20.07
$20 19.23 19.13
rent, $23.95, fell by 6.5% year-on-year.
15.54
Landlord effective rent decreased even $15 14.63 14.88 14.90 14.19
11.68
more dramatically, by 13.0% to $10.16. $10 10.16

$5

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Philadelphia Total Tenant Landlord
Philadelphia Rent Trends Rent Effective Effective
Total rent declined by 1.5% to $28.90.
Operating expenses increased by $35
1.2% and tenant electric rose by 5.0%. 31.05 31.11 30.95 30.50
$30
In contrast, real estate taxes were 28.15
29.10
27.35
28.92 29.33 28.90
26.50
unchanged and net rent dropped by $25 24.28 24.66
26.24 25.93
24.74
23.10 23.12
3.9%. The value of concession packages 21.14 21.52
22.69

increased by 7.1% to $45.00. Tenant $20 19.84

effective rent dipped by 1.8% to $22.69. $15
Landlord effective rent registered an 11.42 11.81
12.67 12.05
10.52
even more substantial decline of 7.2% to $10
8.53 8.28
7.24 7.60 7.68
$7.68. 6.29
$5

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


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