The Puget Sound office market continued to strengthen in Q3 2012, with declining vacancy rates and increasing rental rates. Employment growth at tech companies like Amazon fueled a drop in vacancy to 15.6% while average direct rents rose to $28.63/SF. Several large investment sales occurred, including Amazon's planned $1.16 billion purchase of its Seattle headquarters. Absorption was positive at 342,411 SF, bringing the YTD total to over 2 million SF. The market forecast calls for further declines in vacancy and rental rate growth, especially for quality Class A space downtown.

1. Puget Sound Area, Office
MarketView
Q3 2012 CBRE Global Research and Consulting
GROSS METRO PRODUCT UNEMPLOYMENT OFFICE–USING EMPLOYMENT* YTD OFFICE SALES VOLUME
3.5% 8.0% YoY August 1.5% YoY August $2.18 Billion
POSITIVE ECONOMIC GROWTH MAKES SEATTLE MARKET
ATTRACTIVE TO INVESTORS
The Puget Sound office market continued to to Kilroy Realty Corporation for nearly $187
Quick Stats strengthen during the third quarter of 2012, million. In the Southend market, AEW Capital
largely in part to employment growth at Management sold the Cascade East and West
Change from Last high-tech tenants, most notably Amazon.com. and Atrium Buildings at Centerpoint Corporate
Q3 2012 Yr. Qtr. The online retailer’s footprint has grown by Park to Fountainhead Development Inc. for
1.3 million square feet in the last two years, $46 million.
Total Vacancy 15.6% i i
fueling the drop in office vacancy. Other large
technology tenants signing leases this quarter The Puget Sound office market realized
Direct Lease Rate $28.63 h h
include drugstore.com and Tyler Technologies. 342,411 SF of net absorption this quarter,
Net Absorption 342,411 SF i i The quarter-ending figure of 15.6% is the ninth bringing the year-to-date total to 2.18 million
consecutive quarter of declining vacancy. square feet. As a result of increased leasing
Completions — i i activity, total vacancy dropped to 15.6%,
The third quarter saw several high value nearly 40 basis-points lower than last quarter.
investment deals—the largest being Amazon. Direct Class A rents increased to a weighted
Hot Topics com’s intent to purchase its 1.8 million-square- average of $28.63/SF, per year, full service.
foot headquarters buildings in the Lake Union Eight office projects are currently under
• The Seattle-Bellevue- submarket. This transaction is expected to fetch construction totaling 820,896 SF with 60%
Everett-Tacoma combined $1.16 billion; one of the nation’s highest- of the space preleased. Another 20 million
unemployment rate at the end priced real estate transactions this year, and square feet of announced projects is in the
of August finished at 8.0%, will likely set a Puget Sound area record at pipeline. The forecast is for a continued decline
much stronger than the state- $644 per square foot. The Eastside market saw in vacancy and an increase in rental rates,
wide unemployment rate of Beacon Capital Partners sell two properties this especially quality Class A space in downtown
8.5%. quarter; City Center Bellevue for $229 million Seattle and the Bellevue CBD.
to American Assets Trust, and Skyline Tower
• Investor interest in Class A
Seattle office properties has Chart 1: Total Vacancy vs. Average Direct Asking Lease Rate
resulted in sale transactions Total Vacancy Rate 15.63%
totaling over $2.18 billion to Total Class A Avg. Asking Rental Rate $28.14
date in 2012. 20%
$30.00
18%
• Availability of premium Class
16% $25.00
A space continues to decline
in the Seattle and Bellevue 14%
Central Business Districts. 12% $20.00
10% $15.00
8%
6% $10.00
*Office using employment consists of the
Information, Financial Activities and Professional 4%
& Business Services sectors in King, Snohomish $5.00
and Pierce Counties, not seasonally adjusted.
2%
0% $0.00
2007 2008 2009 2010 2011 2012 YTD
© 2012, CBRE, Inc.

2. Table 1: Market Statistics
Class A Avg. Class A Avg.
Asking Direct Asking Total Last 4
Building Total Q3 Net Qtrs Net Under
Q3 2012
Lease Rate Lease Rate
Submarket SF Vacancy % (Full Service PSF/Yr) (Full Service PSF/Yr) Absorption Absorption Construction
Seattle CBD 20,267,129 14.4% $32.36 $31.89 20,015 341,819 —
Waterfront 2,232,173 10.1% $28.66 $25.94 (24,727) 17,694 —
Pioneer Square 4,032,141 19.9% $30.19 $29.17 21,633 175,874 —
Puget Sound Area, Office | MarketView
Denny Triangle/Regrade 6,935,851 17.9% $30.84 $30.12 241,375 596,384 —
Lower Queen Anne 3,070,626 17.9% $34.16 $34.16 (51,098) 7,030 51,555
Lake Union 5,145,033 5.8% $28.92 $29.08 (6,247) 196,125 502,896
Canal 1,323,832 6.1% $26.67 $26.67 13,286 54,330 47,445
Downtown Seattle 43,006,785 14.2% $31.57 $31.25 214,237 1,389,256 601,896
North Seattle/Interbay 2,382,438 13.4% $24.03 $24.13 15,433 64,544 —
Capitol Hill/E Seattle/Rainier 1,103,325 20.2% $23.10 $23.10 1,887 207,313 —
South Seattle 1,582,508 27.2% $24.35 $24.35 33,356 44,726 200,000
Seattle Close-In 5,068,271 19.2% $24.20 $24.23 50,676 316,583 200,000
Sea-Tac 951,574 42.9% $23.46 $23.46 6,416 (7,132) —
Tukwila 2,101,105 14.1% $20.13 $20.13 12,353 2,624 —
Renton 3,122,922 9.8% $22.80 $22.72 (688) (28,790) —
Kent 1,223,908 32.3% $22.05 $21.76 26,778 (26,453) —
Auburn 289,025 12.9% $20.35 $20.35 — (14,888) —
Federal Way 2,102,953 30.6% $20.63 $19.44 (2,395) 6,244 —
King Co. 6.9% WA State 8.4%
Southend 9,791,487
Snohomish Co. 21.3% 7.9% U.S. Avg. $22.01
7.9% $21.42 42,464 (68,395) —
Bellevue CBD 7,925,601 Pierce Co. 12.0% (Not seasonally adjusted)
9.5% $33.69 $32.70 110,676 198,011 —
I-405 2,910,799 17.0% $28.45 $28.38 (40,359) 18,512 —
SR-520 2,579,812 15.5% $28.21 $28.09 (17,282) 81,005 —
I-90 6,726,625 11.5% $30.18 $30.15 (32,383) 156,015 —
Bel-Red Road 1,440,326 9.0% $28.08 $28.08 18,719 22,632 19,000
Kirkland 1,465,805 7.4% $30.73 $30.70 (4,052) 56,988 —
Redmond 4,247,895 19.0% $26.25 $26.20 (17,855) 107,296 —
Bothell 3,195,293 17.4% $23.40 $22.82 (16,085) (12,487) —
Eastside 30,492,156 13.8% $29.04 $28.64 1,379 627,972 19,000
Lynn/Edm/Mtlk Terr 2,502,650 25.4% $24.69 $24.74 4,037 (26,065) —
Everett 1,747,331 14.2% $21.68 $21.68 255 15,066 —
Northend 4,249,981 20.8% $23.80 $23.94 4,292 (10,999) —
Tacoma CBD 2,856,552 21.7% $24.92 $27.67 27,964 23,462 —
Tacoma Suburban 1,235,161 11.6% $22.38 $22.38 (6,656) (16,218) —
Fife 213,994 17.5% $24.00 $24.74 (4,200) (4,642) —
Puyallup 456,997 30.4% $20.28 $20.28 12,255 17,018 —
Tacoma/Fife 4,762,704 19.7% $23.78 $26.74 29,363 19,620 —
Market Total 97,371,384 15.6% $28.63 $28.14 342,411 2,274,037 820,896
Chart 2: Unemployment Rate ECONOMY/UNEMPLOYMENT RATE
King Co. 7.4% Pierce Co. 9.4% U.S. Avg. 8.2% In September 2012, Businessweek.com placed Seattle second of
Snohomish Co. 8.3% WA State 8.5% (Not seasonally adjusted) the 100 largest metropolises in its annual ranking of “America’s
11% Best Cities.” This honor is due to the abundance of leisure
activities, high education level of current residents and strong job
10%
prospects from several major employers, especially in the
9% software, aerospace and retail industries. Employment in the
Business Services sector, which encompasses software
8%
development, grew by 8,700 workers or 3.75% in 12 months.
7% This is nearly matched by the gain in aerospace manufacturing,
2 7,600 new jobs or a 7.5% increase over the same time period. In
6%
total, employment grew by 43,500 workers in King and
5% Snohomish Counties and another 4,500 in Pierce County in the
4% last 12 months—pushing vacancy rates down and fueling
May11 Jun11 Jul11 Aug11 Sep 11 Oct 11 Nov11 Dec11 Jan12 Feb12 Mar12 Apr12 May12 Jun12 Jul 12 Aug12 demand for new buildings.
© 2012, CBRE, Inc.

3. Chart 3: Vacancy VACANCY
Vacancy in the Puget Sound continued to decrease due to strong
Direct Vacant 14,046,672
Sublease Vacant 1,175,023
demand. The total vacancy rate (direct and sublease space)
Total Vacant 15,221,695 dropped to 15.6% from 16.0% last quarter and 18.0% this time
Q3 2012
last year. The Seattle Close-In market experienced the largest
20,000,000
swing, dropping an entire percentage point to 19.2%. Lager deals
18,000,000
in that market for the quarter include Bartell Drugs moving into
16,000,000 West Seattle Corporate Center and growth in the University
14,000,000 District neighborhood. The northern submarkets of Downtown
Puget Sound Area, Office | MarketView
12,000,000 Seattle still maintain the lowest rates in the region with 5.8% in
10,000,000
Lake Union, and 6.1% in the Canal. Recently announced leases
in Downtown Seattle include 72,800 SF leased to Attachmate at
8,000,000
705 Union Station and a 29,600-SF expansion for Double Down
6,000,000 Interactive. The Eastside market maintained a total vacancy rate
4,000,000 of 13.8%. In this market the shift from suburban office to CBD is
2,000,000 pronounced. Vacancy in the Bellevue CBD submarket dropped
0 140 basis points over the quarter to 12%.
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
TOTAL ASKING RENTAL RATES
As business confidence rises, central business district asking rates
Chart 4: Total Asking Rental Rates
are showing stronger growth than the market as a whole. Class A
Downtown $31.25 Southend $21.42 Northend $23.94 Regional Avg. $28.14 total (direct and sublease) asking rates for Downtown Seattle rose
Seattle Close-In $24.23 Eastside $28.64 Tacoma/Fife $26.74
to $31.14/SF, and Eastside rates jumped to $28.64/SF, 4.3% and
$32.00 3.7%, respectively over the last 12 months. The average asking
Class A rate in the Seattle CBD reached $31.89/SF, and the
$30.00 Bellevue CBD leads with an asking rate of $32.70/SF, 6.3% and
7.5% growth rates, respectively, over this time last year. This trend
$28.00
is also displayed in the vacancy rate gap. The Bellevue CBD Class
$26.00 A vacancy rate is 11.8% while Class B is 17.3%. These results
coincide with absorption trends showing tenants are moving from
$24.00 suburban space into central business districts across Puget Sound.
$22.00 UNDER CONSTRUCTION
Hammers are being swung in several parts of the region due to
$20.00
strong tenant demand. Construction is underway for a 173,899
$18.00 SF research building for UW Medicine, and the finishing touches
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 are being put on Phase V for Amazon.com, a 340,563 SF
building on Boren Ave North. Another large construction project
Chart 5: Under Construction, Absorption and in the area is Homeplate Center, 168,000 SF of Class A office
Construction Completions space being built by American Life, a local developer. Spear
Street Capital is building 202 Westlake and announced this
Total Absorption 342,411
Construction Completions — quarter it had leased all 129,000 SF to Amazon.com.
Under Construction 820,896
1,200,000
ABSORPTION & CONSTRUCTION COMPLETIONS
The third quarter of 2012 saw a flurry of absorption in Downtown
1,000,000
Seattle and the Bellevue CBD and no construction deliveries. The
Denny Triangle/Regrade submarket witnessed the most
800,000
absorption, 214,237 SF this quarter. Amazon.com can be
credited with a good deal of the expansion, filling 320,000 SF in
600,000
West 8th, while KPMG moved into 45,000 SF in 1918 Eighth.
The Eastside was the only market to experience negative
400,000
absorption (1,132 SF), though the Bellevue CBD took in 111,880
SF of net growth. Expanding tenants include New York Life, who
moved into 30,000 SF at The Summit. Global Scholar relocated 3
200,000
into 31,000 SF and Caradigm opened a 68,900-SF office, both
0 at City Center Bellevue.
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
© 2012, CBRE, Inc.

4. MARKET AREA DESCRIPTIONS
Downtown Seattle
Downtown Seattle consists of 43,006,785 SF (44%) of the office market gross leasable area
(GLA). It includes office buildings west of I-5 from the Ship Canal in Fremont to Royal Brougham
Q3 2012
near the stadiums.
Seattle Close-In
The Seattle Close-In market consists of 5,068,271 SF (5%) of the office market GLA. It includes
office buildings within the city limits of Seattle, Shoreline and Lake Forest Park, not included in the
Puget Sound Area, Office | MarketView
downtown submarket.
Southend
The Southend consists of 9,791,487 SF (10%) of the office market GLA. It comprises all of King
County south of Lake Washington.
Tacoma/Fife
Tacoma/Fife consists of 4,762,704 SF (5%) of the office market GLA. It comprises Pierce County.
Eastside
The Eastside consists of 30,492,156 SF (31%) of the office market GLA. It comprises all King
County markets directly east of Lake Washington, plus that portion of Bothell extending into
Snohomish County.
Northend
The Northend consists of 4,249,981 SF (4%) of the office market GLA. It consists of Snohomish
County except that portion of Bothell extending into Snohomish County.
CONTACTS
For more information about this Local MarketView, please contact:
U.S. RESEARCH
Carolyn Davis Jim Bowles John R. Miller Steve Penn
Research Manager Senior Managing Director Managing Director Managing Director
Puget Sound Area Puget Sound Area Brokerage Services Asset Services
CBRE CBRE CBRE CBRE
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GLOBAL RESEARCH AND CONSULTING
This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting—a
network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric
forecasting and consulting solutions to real estate investors and occupiers around the globe.
DISCLAIMER
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reproduced without prior written permission of the CBRE Global Chief Economist. cjm 10-26-12
© 2012, CBRE, Inc.