2Q

2011

3Q

2011

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

MARKET REPORTNASHVILLE

www.colliers.com/Nashville

Market Still Recovering, Secondary Cities Gain Market Share

As the year progresses, we continue to see recovery and growth in the Nashville market. In fact, Development Counselors International’s “Winning Strategies in Economic Development Marketing” survey, which questions over 300 corporate executives from across the country, recognized Tennessee as the fourth best state for business climate. The Tennessee area, and ultimately the Nashville MSA, is attractive to companies for its friendly communities, low operating costs and attractive business culture. The market is reflecting this positive outlook on the local business strength and future.

The article “Back to Business?“ in CIRE Magazine delves into the topic of companies looking outside of primary markets such as New York City, Los Angeles and Chicago. Instead, companies are targeting secondary cities for relocation and expansion where they can find great office space for reasonable prices. Nashville is benefitting from this trend as one of the most attractive secondary cities. Additionally, it was recently announced by MarketStreet Enterprises that they plan to develop office buildings in the Gulch area that will add 1.5 million square feet of office space to the market. As companies take advantage of the current market and new office space becomes available, the issue of parking and public transportation, especially in the Downtown submarket, will become major factors in bringing business to Nashville.

Absorption continues to be positive at 105,707 square feet, making the year-to-date absorption 285,561 square feet. This is significantly lower than the third quarter number in 2010. With such a slow start to this year, it’s bound to take some time to fully recover.

MARKET INDICATORS

3Q 2011 | OFFICE

Nashville Office MarketSummary of Statistics, Q3 2011

Vacancy Rate: 11.0%

Absorption: 105,707 SF

Under Construction: 320,820 SF

Asking Rents Per Square Feet:Class A: $22.40Class B: $17.21Class C: $14.86Overall Rental Rates: $19.78

Downtown Class A: $22.30Suburban Class A: $23.33

Quarterly Comparisons and Totals

QUARTER BLDGSTOTAL

INVENTORY SF

DIRECT VACANT

DIRECT VACANCY

RATE

SUBLEASE VACANCY

RATE

NET ABSORPTION

CURRENT QTR

NET ABSORPTION

YTD SF

UNDER CONSTRUCTION

SF

AVG ASKING RATE

Q3.11 380 31,039,756 3,399,841 11.0% 2.2% 105,707 285,561 320,820 $19.78

Q2.11 381 31,056,877 3,506,318 11.3% 2.2% 166,274 210,025 267,832 $18.05

Q1.11 419 33,633,050 3,641,291 11.9% 2.0% 68,010 68,010 128,110 $19.71

Q4.10 380 30,983,891 3,701,006 11.9% 2.0% 101,282 609,124 128,110 $20.05

Q3.10 380 31,003,721 3,739,721 12.1% 2.1% 167,858 501,370 101,510 $20.10

Updated 7-2011

Vacancy rates have steadily been declining over the past year. The current quarter rate is 11%, a decrease of 1.1% since last year. Low vacancy rates suggest that negotiating leverage will swing back in favor of the landlord.

As vacancy decreases and tenant demand increases, rental rates have started to rise. Though still lower than the third quarter of 2010, it has increased $1.73 since last quarter. The highest rental rates continue to be found in the Green Hills and Music Row areas.

Some new leases were negotiated this past quarter. HCA subsidiary Parallon Business Solutions announced a new lease at Eight Corporate Centre in Cool Springs for an 83,000 square-foot space.

Tractor Supply company leased a 66,085 square-foot space in Westwood South in addition to their corporate headquarters in Brentwood. Correct Care Solutions signed a new lease for a 47,352 square-foot space in Airways Plaza. LifePoint has recently executed a lease for 200,000 square feet in Brentwood.

In addition to these leases, several office buildings are currently under construction. The Trolley Barns at Rolling Mill Hill had its official ground breaking ceremony and announced the Entrepreneur Center as a future tenant. Boyle Investment Company broke ground on the final phase of the Meridian Cool Springs office development. It will be a seven-story, 175,000 square-foot Class A office building that is expected to be completed by the end of 2012.

Class A Class B Class C

-60000

-30000

0

30000

60000

90000

120000

150000

Wes

t End

Airp

ort N

orth

Airp

ort S

outh

Bren

twoo

d

Cool

Spr

ings

/Fra

nklin

Dow

ntow

n

Gree

n H

ills/

Mus

ic R

ow

Met

roce

nter

Rive

rgat

e/No

rth

3Q 2011 | Vacancy Space By Type

Class A 1,312,423 SF

Class B 1,623,067 SF

Class C 464,351 SF

3Q 2011 | Net Absorption By Submarket

RECENT SALES TRANSACTIONSSALES ACTIVITY

PROPERTY BUYER SALE PRICE SIZE SF SUBMARKET

Nine Corporate Centre JP Morgan $42,000,000 155,919 Cool Springs

9010 Overlook Boulevard Franklin Land Associates LLC $2,300,000 36,000 Brentwood

110 Westwood Place Universal Health Services $2,900,000 24,075 Brentwood

RECENT LEASING TRANSACTIONSLEASING ACTIVITY

PROPERTY TENANT SIZE SF TYPE SUBMARKET

Eight Corporate Centre Parallon Business Solutions 83,000 New Cool Springs

Westwood South Tractor Supply Company 66,085 New Brentwood

Airways Plaza Correct Care Solutions 47,352 New Airport South

Nine Corporate Centre Healthcare Management Systems 32,888 New Cool Springs

Aspen Corporate Centre 400 Peak 10 26,356 Expansion Cool Springs

DEFINITIONS

Absorption - The net change in occupied space between the current quarter and the previous quarter, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy.

Class A Building - Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.

Class B Building - Buildings competing for a wide range of users with average rents. Building finishes are fair to good for the area and systems are adequate but the building does not compete with Class A at the same price.

Class C Building - Buildings competing for tenants requiring functional space at rents below the average for the area.

Total Building SF - All single & multi tenant office buildings above 20,000 SF excluding medical, government and owner occupied.

Vacancy Rate - Percentage rate of the total amount of physically vacant space divided by the total amount of existing inventory.

Bold text denotes Colliers International Nashville transactions.

P. 2 | COLLIERS INTERNATIONAL

MARKET REPORT | Q3 2011 | OFFICE | NASHVILLE

UPDATE Market Comparisons

OFFICE MARKET

CLASS BLDGS TOTALINVENTORY

SF

DIRECTVACANT

SF

DIRECTVACANCY

RATE

SUBLEASEVACANCY

RATE

VACANCY RATE PRIOR QTR

NET ABSORPTION

CURRENTQTR SF

NET ABSORPTION

YTDSF

UNDER CONSTRUCTION

SF

AVG ASKING RATE

AIRPORT NORTH

A 10 1,913,290 127,578 6.7% 4.4% 6.7% 237 5,965 0 $19.63

B 23 1,704,947 244,418 14.3% 0.0% 14.0% (26,867) (19,786) 0 $16.00

TOTAL 33 3,618,237 371,996 10.3% 2.3% 10.1% (26,630) (13,821) 0 $18.14

AIRPORT SOUTH

A 8 565,231 0 0.0% 4.0% 0.0% 0 4,471 0 $19.50

B 17 1,423,036 196,189 13.8% 2.7% 17.10% 46,963 60,423 0 $14.72

C 31 864,449 267,977 31.0% 0.8% 31.1% 500 (79) 0 $12.87

TOTAL 56 2,852,716 464,166 16.3% 2.4% 17.9% 47,463 64,815 0 $14.19

BRENTWOOD

A 28 2,464,234 87,451 3.5% 1.1% 6.1% 66,322 100,441 0 $22.36

B 43 2,242,704 155,652 6.9% 0.8% 8.0% 40,004 45,853 22,700 $19.58

C 3 95,160 2,300 2.4% 0.0% 2.4% 0 0 0 $16.00

TOTAL 74 4,802,098 245,403 5.1% 1.0% 6.9% 106,326 146,294 22,700 $20.65

COOL SPRINGS/FRANKLIN

A 30 3,899,447 310,322 8.05 1.3% 8.6% 22,924 56,247 175,000 $22.95

B 23 1,036,647 66,504 6.4% 3.7% 6.6% (2,150) (9,029) 18,120 $17.28

TOTAL 53 4,936,094 376,868 7.6% 1.8% 8.2% 20,774 47,218 193,120 $22.25

DOWNTOWN

A 11 3,844,729 637,658 16.6% 6.7% 17.0% 9,172 55,305 0 $22.30

B 37 3,369,509 795,861 23.6% 0.3% 23.2% (23,063) 20,220 90,000 $16.81

C 9 369,375 27,585 7.5% 0.7% 9.1% 6,200 9,535 0 $16.89

TOTAL 57 7,583,613 1,461,104 19.3% 3.6% 19.4% (7,691) 85,060 90,000 $19.63

GREEN HILLS/MUSIC ROW

A 8 962,539 14,074 1.5% 0.0% 1.5% 0 15,801 0 $27.72

B 21 731,037 57,499 7.9% 0.2% 6.8% (1,142) (4,454) 26,600 $20.99

C 13 366,039 25,333 6.9% 0.0% 8.4% 5,557 17,543 0 $21.66

TOTAL 42 2,059,615 96,906 4.7% 0.07% 4.6% 4,415 28,890 26,600 $24.58

METROCENTER

A 4 476,974 5,323 1.1% 0.0% 1.1% 0 3,000 0 $17.40

B 5 525,862 54,029 10.3% 2.9% 9.9% (803) (3,954) 0 $16.12

C 5 435,927 27,912 6.4% 0.0% 6.6% 0 0 0 $14.10

TOTAL 14 1,437,763 87,264 6.1% 1.1% 6.0% (803) (954) 0 $15.99

RIVERGATE/NORTH

A 4 204,680 21,945 10.7% 0.0% 9.8% 0 (200) 0 $19.02

B 3 81,952 10,950 1.4% 0.0% 13.4% 0 0 15,000 $14.50

C 8 187,405 46,204 24.7% 0.0% 15.6% (6,890) (16,786) 0 $13.37

TOTAL 15 474,037 79,099 16.7% 0.0% 12.6% (6,890) (16,986) 15,000 $16.55

WEST END/BELLE MEADE

A 13 2,292,172 108,172 4.7% 4.0% 3.1% (32,043) (51,295) 0 $26.11

B 16 718,265 41,965 5.8% 0.0% 5.4% (3,500) (3,640) 0 $18.96

C 7 265,149 67,040 25.3% 0.0% 26.5% 4,286 (20) 0 $17.06

TOTAL 36 3,275,586 217,077 6.6% 2.8% 5.5% (31,257) (54,955) 0 $23.45

NASHVILLE MARKET TOTAL

A 116 16,623,296 1,312,423 7.9% 3.2% 8.3% 66,612 189,735 175,000 $22.40

B 188 11,832,959 1,623,067 13.7% 1.0% 14.1% 29,442 85,633 145,820 $17.21

C 76 2,583,504 464,351 18.0% 0.4% 18.0% 9,653 10,193 0 $14.86

TOTAL 380 31,039,759 3,399,841 11.0% 2.2% 11.3% 105,707 285,561 320,820 $19.78

MARKET REPORT | Q3 2011 | OFFICE | NASHVILLE

COLLIERS INTERNATIONAL | P. 3

UNITED STATES:

NashvilleNate GreeneManaging Partner300 BroadwayNashville, TN, 37201TEL +1 615 850 2729FAX +1 615 850 3229

RESEARCHER:

NashvilleAllison SchepmanMarketing Director300 BroadwayNashville, TN, 37201TEL +1 615 850 2748FAX +1 615 244 2957

512 offices in 61 countries on 6 continents

• $1.5 billion in annual revenue• 979 million square feet under management

• 12,500 professionals

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.

www.colliers.com/Nashville

Accelerating success.

Richard Fulton, CCIMDIR +1 615 850 2719

Office/Investment

Nate Greene, CCIMDIR +1 615 850 2729

Office/InvestmentManaging Partner

Bert MathewsDIR +1 615 850 2701

Office/InvestmentPrincipal

Chris Grear, CCIMDIR +1 615 850 2702

Office/Investment

John Gifford, CCIMDIR +1 615 850 2713

Office/Investment

Shane Douglas, CCIMDIR +1 615 850 2734

Office/Investment

Lee ParadiseDIR +1 615 850 2717

Office/Investment

Vickie SaitoDIR +1 615 850 2711Office/Investment

ABOUT COLLIERS INTERNATIONAL – NASHVILLE Collier International Nashville is one of the largest full service commercial real

estate firms in the region. Its brokers provide a myriad of services to owners

and tenants with a commitment to excellence that has won them the respect

of local, national and international clients for many years. With more than 25

employees, the firm serves clients ranging from Fortune 500 corporations,

major banks and insurance companies to investors, private institutions and small

businesses.

Chad PoffDIR +1 615 850 2707

Office/Investment

Figure 1: Nashville Office Submarkets include Airport North, Airport South, Brentwood, Cool Springs/Franklin, Downtown, Green Hills/Music Row, Metrocenter, Rivergate/North and West End/Belle Meade.

BRENTWOOD

GREEN HILLSMUSIC ROW100 OAKS

COOL SPRINGS/FRANKLIN

WEST END

RUTHERFORD COUNTY

WILSONCOUNTY

RIVERGATE/HENDERSONVILLE

NORTHWEST

CENTRAL BUSINESS DISTRICT

AIRPORTSOUTH

AIRPORTNORTH

DOWNTOWNMETRO CENTER

Gallatin Rd.

Leba

non P

l.

West E

nd A

ve.

Harding Pl.

O ld Hickory Blvd.

Fran

klin

Moores Ln.

Murfreesboro Rd.

Nolensville Rd.

Done

lson

Pike

Briley

Pkwy.

Bell Rd

.

Woodmont Blvd.

MARKET REPORT | Q3 2011 | OFFICE | NASHVILLE