COMPLETIONS VS ABSORPTIONOVERALL VACANCY RATE

THE KNOWLEDGE REPORTCINCINNATI, OH

www.colliers.com/cincinnati

CBD Steals the Show with Several

New Lease Signings

EXECUTIVE SUMMARY

The Greater Cincinnati offi ce market had a fl urry of activity in the third quarter of 2011. Several new lease signings were a welcome sign for a market that has seen little to no growth over the past 24 months. The overall vacancy rate came in at 20.4% and net absorption of offi ce space for the third quarter totaled 85,568 square feet.

Most activity occurred in the Central Business District (CBD), with several large lease signings taking place. Ohio Governor John Kasich played a huge role in the market by luring two Fortune 500 companies across the river from Kentucky to downtown Cincinnati. The incentives the Governor’s offi ce put on the table were too much for Omnicare and Nielsen to pass up. While this move was disappointing for the Northern Kentucky submarket, the Greater Cincinnati market received an affi rmation that these companies’ headquarters will remain in the region for some time to come.

Rental rates increased slightly from $17.78 per square foot to $17.91 per square foot. This increase, although small, is good news for the Cincinnati market which has not seen rental rates increase in the past several years.

Local employment and jobs growth continues to be the number one issue aff ecting the Cincinnati market, as absorption of offi ce space is tied directly to the growth of jobs. As the Governor’s offi ce continues to press forward, creating more jobs for the State of Ohio, we hope more outside companies will look to our area for their relocation needs.

MARKET INDICATORS

*Projected Change to

Following Quarter

Square

Feet

Q3 11 Q4 11*

VACANCY

NET ABSORPTION

CONSTRUCTION — —

RENTAL RATE — —

Q3 2011 | OFFICE

-400,000

-200,000

0

200,000

400,000

600,000

800,000

3Q 0

9

4Q 0

9

1Q 1

0

2Q 1

0

3Q 1

0

4Q 1

0

1Q 1

1

2Q 1

1

3Q 1

1

-400,000

-200,000

0

200,000

400,000

600,000

800,000

3Q 0

9

4Q 0

9

1Q 1

0

2Q 1

0

3Q 1

0

4Q 1

0

1Q 1

1

2Q 1

1

3Q 1

1

20%

21%

22%

23%

24%

25%

Overall Vacancy Rate

18%

19%

20%

21%

22%

23%

24%

25%

3Q 0

9

4Q 0

9

1Q 1

0

2Q 1

0

3Q 1

0

4Q 1

0

1Q 1

1

2Q 1

1

3Q 1

1

Overall Vacancy Rate

AbsorptionCompletions

The Offi ce Market saw 85,568 square feet of positive absorption this quarter.

CENTRAL BUSINESS DISTRICT

The downtown Central Business District was the most vibrant submarket in Greater Cincinnati, posting more than 85,000 square feet of positive absorption for the third quarter of 2011. The quarterly absorption doesn’t tell the story though, as the biggest headlines were made with several large lease signings in the downtown market.

Omnicare signed a lease for 150,000 square feet at Convergys’ Atrium I on Fourth Street, Nielsen signed a lease for 85,000 square feet at the Chiquita Center and Vorys, Sater, Seymour and Pease LLP signed a lease for 75,000 square feet at Great American Tower. As these companies have yet to move in, the majority of these new leases will not aff ect the vacancy rate until 2012. Rental rates in the Central Business District averaged $22.93 per square foot for Class A space and $15.39 per square foot for Class B space. These are gross numbers, meaning the rental rate is the tenant’s all-inclusive rental payment, including taxes and operating expenses.

Looking into the next quarter, the next big announcement in the CBD should come when Chiquita Brands International decides to stay in Greater Cincinnati or relocate to a southeastern market outside of our region. The company has made headlines in recent weeks as it announced it is considering a move out of state. Much debate has occurred on whether Chiquita will stay or go. The produce company occupies more than 150,000 square feet of Class A space in the Chiquita Center on Fifth Street, so a move out of town will certainly aff ect the overall vacancy rate in the downtown market. SUBURBAN MARKETS

The suburban submarkets remained fl at, as net absorption totaled negative 331 square feet. F+W Publications decided to relocate further north, moving 62,000 square feet from Kenwood to Blue Ash. The relocation out of Kenwood increased the vacancy rate in this submarket to 10.6%, marking the fi rst time in several quarters the Kenwood submarket has hit a double digit vacancy rate. The Blue Ash submarket gained from this move, as well as a couple other new deals in this area. Blue Ash posted 151,015 square feet of overall net absorption, while the vacancy rate dropped from 19.7% to 16.1%.

UPDATE Recent Transactions

LEASING ACTIVITY

PROPERTY SUBMARKET TENANT LANDLORD SIZE TYPE

Executive Center 1 Tri-County Humana Right Source 111 Merchant St Holdings 173,397 Direct Lease

Atrium I CBD Omnicare Convergys 150,000 Direct Lease

19 Broadcast Plaza CBD WXIX Broadcast Plaza LLC Tappan Properties 87,734 Sale

Chiquita Center CBD Nielsen Columbia Development 85,000 Direct Lease

Centre Pointe Offi ce Park I-75 Corridor North GE Aviation Duke Realty 81,000 Direct Lease

Great American Tower CBD Vorys, Sater, Seymour and Pease Western & Southern 60,000 Direct Lease

11333 Cornell Park Drive Blue Ash Cornell Park Drive LLC State Automobile Mutual Insurance 28,998 Sale

600 Vine CBD Rendigs, Fry, Kiely & Dennis LLP Hertz Center 26,000 Direct Lease

Cornerstone Offi ce Park Midtown Neace Lukens Cornerstone at Norwood LLC 26,000 Direct Lease

McCauley Place Blue Ash Catholic Health Partners Duke Realty 20,902 Direct Lease

Liberty Commons I-75 Corridor North Christ Hospital Liberty Medical LLC 17,213 Direct Lease

312 Plum Street CBD MCI Metro JV/CVG Partners LLC 17,205 Lease Renewal

11223 Cornell Park Drive Blue Ash Girl Scouts of America Dbi Properties LLC 17,000 Sale

Hawthorne Center Blue Ash Coca-Cola Company Al Neyer, Inc. 14,860 Direct Lease

Chemed Center CBD Greenebaum, Doll & McDonald, PLLC 255 Fifth Limited Partnership 12,021 Lease Expansion

Edgewood Medical Buildings NKY Combined Care Management N/A 11,660 Sale

8805 Governors Hill Drive I-71 Corridor North Camp Dresser & McKee New York Life Insurance Co. 10,150 Direct Lease

Harrison Business Center West Sure Seal Werster Erlene 10,000 Direct Lease

AVG. ASKING RATES (PER SF-FULL SERVICE GROSS)

$17.50

$17.75

$18.00

$18.25

3Q 0

9

4Q 0

9

1Q 1

0

2Q 1

0

3Q 1

0

4Q 1

0

1Q11

2Q11

3Q11

Average Rental Rate (Gross)

Transactions are believed to be accurate but not guaranteed.

Chiquita Center

THE KNOWLEDGE REPORT | Q3 2011 | OFFICE | CINCINNATI

P. 2 | COLLIERS INTERNATIONAL

TOTALINVENTORY

DIRECTVACANT SF

SUBLEASEVACANT SF

TOTAL VACANT SF

OVERALLVACANCY RATE

PRIOR QUARTER VACANCY RATE

NETABSORPTION

YTD NET ABSORPTION

AVERAGEASKING

RATE(GROSS)

UNDERCONSTRUCTION

BLUE ASHClass A 2,679,557 461,434 0 461,434 17.2% 22.3% 136,282 110,631 $20.91 84,598Class B 1,885,234 277,823 1,099 278,922 14.8% 15.6% 14,733 27,512 $15.56Class C 368,274 53,936 0 53,936 14.6% 21.7% 0 330 $13.50TOTAL 4,933,065 793,193 1,099 794,292 16.1% 19.7% 151,015 138,473 $18.70 84,598

CBDClass A 8,866,525 1,557,473 70,467 1,627,940 18.4% 19.2% 77,273 314,790 $22.93Class B 6,924,138 1,111,991 0 1,111,991 16.1% 16.3% 4,627 -56,274 $15.00Class C 2,754,230 758,005 0 758,005 27.5% 24.6% 3,999 -288,577 $11.84TOTAL 18,544,893 3,427,469 70,467 3,497,936 18.9% 19.0% 85,899 -30,061 $18.72

CBD PERIPHERYClass A 1,264,688 395,036 5,428 400,464 31.7% 32.0% 4,393 4,220 $22.07Class B 1,347,043 341,290 13,000 354,290 26.3% 27.6% 7,477 -8,375 $15.39Class C 857,197 212,839 0 212,839 24.8% 21.5% -28,839 -26,386 $12.21TOTAL 3,468,928 949,165 18,428 967,593 27.9% 27.7% -16,969 -30,541 $17.28

EASTClass A 786,963 129,306 0 129,306 16.4% 12.8% -28,424 -26,639 $19.97Class B 889,675 179,896 0 179,896 20.2% 20.8% 5,216 2,631 $14.01Class C 641,989 140,427 0 140,427 21.9% 27.8% 38,022 38,849 $12.61TOTAL 2,318,627 449,629 0 449,629 19.4% 20.0% 14,814 14,841 $15.32

I-71 CORRIDOR NORTHClass A 2,816,264 618,470 0 618,470 22.0% 22.1% 4,792 34,701 $19.61Class B 1,156,788 391,178 0 391,178 33.8% 34.9% 12,602 14,099 $15.50Class C 35,040 0 0 0 0.0% 0.0% 0 0TOTAL 4,008,092 1,009,648 0 1,009,648 25.2% 25.6% 17,394 48,800 $18.10

I-75 CORRIDOR NORTHClass A 1,603,815 193,569 0 193,569 12.1% 13.1% 16,876 14,455 $21.00Class B 501,094 56,351 0 56,351 11.2% 8.2% -15,039 -15,439 $18.47Class C 167,891 28,387 0 28,387 16.9% 13.8% -5,273 -10,083 $11.68TOTAL 2,272,800 278,307 0 278,307 12.2% 12.1% -3,436 -11,067 $19.57

KENWOOD/MONTGOMERYClass A 944,328 126,958 5,736 132,694 14.1% 6.3% -72,786 -43,595 $26.45 109,000Class B 939,605 151,687 0 151,687 16.1% 15.3% -7,622 -13,177 $17.92Class C 44,955 0 0 0 0.0% 0.0% 0 1,500TOTAL 1,928,888 278,645 5,736 284,381 14.7% 10.6% -80,408 -55,272 $22.04 109,000

MIDTOWNClass A 1,276,956 167,189 0 167,189 13.1% 13.3% 2,328 3,624 $23.28Class B 764,808 132,578 30,000 162,578 21.3% 19.8% -10,997 -53,418 $17.76Class C 898,340 186,516 0 186,516 20.8% 19.5% 23,449 49,398 $13.16TOTAL 2,940,104 486,283 30,000 516,283 17.6% 17.0% 14,780 -396 $17.91

NORTHERN KENTUCKYClass A 3,517,813 643,687 0 643,687 18.3% 16.5% -38,243 43,531 $20.71Class B 3,017,169 555,028 4,570 559,598 18.5% 20.9% 71,192 -26,912 $16.59Class C 566,028 122,998 10,000 132,998 23.5% 19.0% -13,974 -13,099 $12.51TOTAL 7,101,010 1,321,713 14,570 1,336,283 18.8% 18.6% 18,975 3,520 $18.42

TRI-COUNTYClass A 1,741,868 534,317 7,487 541,804 31.1% 28.1% -52,487 3,581 $17.56Class B 2,229,938 664,205 19,390 683,595 30.7% 30.2% -10,724 -16,358 $13.97Class C 517,338 176,320 0 176,320 34.1% 28.1% -21,937 -26,109 $13.32TOTAL 4,489,144 1,374,842 26,877 1,401,719 31.2% 29.1% -85,148 -38,886 $15.50

WESTClass B 346,694 85,464 0 85,464 24.7% 23.1% -5,325 -19,572 $16.34 51,200Class C 360,933 117,667 0 117,667 32.6% 25.4% -26,023 -31,337 $10.93TOTAL 707,627 203,131 0 203,131 28.7% 24.3% -31,348 -50,909 $13.67 51,200

MARKET TOTALSClass A 25,498,777 4,827,439 89,118 4,916,557 19.3% 19.4% 50,004 459,299 $21.35Class B 20,002,186 3,947,491 68,059 4,015,550 20.1% 20.4% 66,140 -165,283 $15.39Class C 7,212,215 1,797,095 10,000 1,807,095 25.1% 23.0% -30,576 -305,514 $12.30

TOTAL 52,713,178 10,572,025 167,177 10,739,202 20.4% 85,568 -11,498 $17.91 244,798QUARTERLY COMPARISONQ3-11 52,713,178 10,793,202 20.4% 85,568 $17.91Q2-11 53,805,774 10,926,546 20.3% -57,767 $17.78Q1-11 53,805,774 10,868,779 20.2% (39,299) $17.85Q4-10 37,170,512 8,387,729 22.6% 164,236 $18.11Q3-10 37,038,512 8,461,570 22.8% (19,950) $18.04Q2-10 36,997,992 8,367,632 22.6% (5,736) $18.03

THE KNOWLEDGE REPORT | Q3 2011 | OFFICE | CINCINNATI

COLLIERS INTERNATIONAL | P. 3

Rental rates in the suburban submarkets averaged $17.49 per square foot for all property types. Class A space in the suburbs was recorded at $20.42 per square foot. This continues to make Class A space less expensive in the suburbs than Class A space in the CBD.

CONSTRUCTION

Too much economic uncertainty combined with high vacancy rates in most submarkets continues to limit construction this year. As previously reported, The Banks mixed-use development continues to move forward, but no new offi ce space is anticipated anytime soon with this project.

Three sites in the suburban submarkets are moving towards completion. These sites include the fi rst phase of the FBI site in Kenwood totaling 109,000 square feet, Duke Realty’s Western Ridge Medical Offi ce Building, totaling 29,700 square feet and the Urology Group in the midtown submarket, totaling 45,000 square feet.

One major construction announcement that made regional headlines was the start of the anticipated Rookwood Exchange development in Norwood. This development was sidelined for the past three years, but has received the green light by its developer Jeff rey R. Anderson Real Estate. The fi rst phase of this project will consist of a 123-room Courtyard by Marriott Hotel and a 16-screen movie theater that includes a 7,000 square foot restaurant and bar with VIP balcony seating. The development will eventually include two large upscale restaurants, offi ce space and possibly two additional hotels.

FORECAST

The fourth quarter of 2011 should cool in terms of new lease signings, but as tenants begin to move into vacant space from deals signed previously this year, we should see a small amount of positive absorption towards the end of December. This positive absorption should put the year-to-date net absorption back in the black, which is welcome news for the Greater Cincinnati Market.

CEO/PRESIDENT:

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DIRECTOR OF RESEARCH:

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GRAPHIC DESIGNER:

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www.colliers.com/cincinnati

Accelerating success.

OFFICE TEAM:

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3

8

INT’LAIRPORT

I-75 NORTH OFI-275

OUTLYING WARRENCOUNTY

I-71 NORTH OF I-275TRI-COUNTY

BLUE ASH

KENWOOD/MONTGOMERY

EAST

MIDTOWN

CBD-PERIPHERY

NORTHERN KENTUCKY

WEST

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THE KNOWLEDGE REPORT | Q3 2011 | OFFICE | CINCINNATI

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