TENANT VIEW

Office Properties

WASHINGTON, DC
THIRD QUARTER 2011

This Is The New Norm

The economy is Issue No. 1 and is being discussed almost non-stop. From offices to classrooms to coffee shops, most conversations end in one general consensus were in bad shape. But are we, really? Unemployment is high at 9.1 percent, down from its peak in 2009, and still 3 percent higher than the average rate for the last nine years. But thats not the whole picture. The stock market, although volatile, is back to pre-boom levels. GDP is on a course to increase almost 4 percent over last year, down slightly from the 4.4 percent seen last year, which could indicate a leveling, or an otherwise normalizing of a post-dip growth period. Either way, what were seeing right now may be closer to the new norm than we expect, or would like to accept. And thats the key; whats holding back our recovery is our psychology. What we want and what we hope to happen is not realistic and that is hindering, more than helping our own cause. This is similar for business sentiment as well. With corporations sitting on about $2 trillion and unemployment all but stagnant, it is clear that companies are waiting for the very change they must initiate. The collective thought process is to sit back and wait and see, and thats holding back would-be economic growth. No matter how much we want the economy to recover, it wont without something to spur it. Every recession in American history was followed by growth that was fueled by innovation in technology or industry and that is what will ultimately revive our economy this time. Similar to the period following the Great Depression, we are struggling to find our footing for growth. Also, as with the New Deal programs of the 1930s, the positive effects of recent federal stimuli are being offset by lagging business investments put off by those same stimuli. The economic impact of WWII ultimately revived our economy in the 1940s and we cannot and should not expect a similar recovery spur. Our ability to revive the economy should be based on solid, well-rounded economic policy and business practices, and those both take time and more importantly, participation. Corporate cash stockpiles, improving employment, and a relatively strong albeit volatile stock market all point the finger at employment as well as the thoughts and feelings of consumers and businesses. As much as consumers are concerned for the future of the economy, businesses are concerned for the future of business and what shape it will take, and few seem ready to shape it.

CHANGE FOR THE QUARTER

INVENTORY SF OVERALL VACANCY SUBLEASE VACANCY AVERAGE ASKING RATE NET ABSORPTION UNDER CONSTRUCTION UNEMPLOYMENT

UGL Services encourages commentary and feedback concerning corporate real estate issues and trends impacting the office markets. Please submit your inquiries to expert representation via:

WASHINGTON, DC RESEARCH Daniel J Russell, Senior Research Analyst daniel.russell@na.ugllimited.com 202.293.9556 www.ugl-equis.com

Market Overview
UNEMPLOYMENT.
The U.S. Bureau of Labor Statistics reports that as of August, the Washington Metro area has the second lowest unemployment rate in the county at 6.1 percent. All three areas of the Metro saw increases in unemployment, but all were less than .5 percent. Virginia continues to lead the area with the lowest unemployment rate of 6.3 percent statewide.

THE ECONOMY. Despite cuts in

federal spending, through the third quarter, the Washington Metropolitan Area continued to show its stay power, strength and even some slight improvements. While the significant material ef fects of government cutbacks are really yet to be seen, the private sector seems to be slowly stepping up to fill the voids. Job growth in September was positive, with approximately 103,000 jobs nationally, 46 percent of which were in professional and business services. Professional and business services is the Washington Metropolitan Areas second largest employment sector behind the government, so its growth is a promising sign of soon to be improving conditions. Further, its improvement emphasizes the benefit and necessity to diversifying the employment base in the Washington Metropolitan Area. Looking at the big picture, The Bureau of Labor Statistics September jobs report also points out that there has been an average increase of total nonfarm payroll employment of 72,000 jobs per month since April of this year.
O F F I C E | 3 Q 2 0 11 Page 1

Although adding roughly 3 percent of the total unemployed population is a negligible, it is still growth in the most sensitive of economic indicators. Additionally, Consumer Reports Index showed improvement among consumer confidence, with the majority of remaining concern in slow job creation. While nationally, unemployment remains steady at 9.1 percent, the Washington DC Metropolitan Area has the nations second lowest unemployment rate at 6.1 percent. Unfor tunately Washington, DC, Virginia, and Maryland all saw slight increases in unemployment during the third quarter.

National

Washington, DC

DC-VA-MD-WV MSA

Aug 11

Aug 10

Aug 09

Aug 08

Aug 07

VACA N CY. T h e Wa s hin g t on Maryland-Virginia Metropolitan Area saw very little vacancy change through the third quarter. Overall, there was a decrease in vacancy of a minimal 0.2 percent, as it has done each quarter this year. Washington, DC similarly saw a decrease in vacancy to 9.7 percent, down from 9.8 percent second quarter and is at its lowest point so far this year. Class A space in Washington, DC
Aug 06

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

[Market Overview Continued]

continues to see decreasing vacancy rates while Class B space continues to experience increased vacancy, possibly indicating an ongoing migration of Class B tenants into Class A space. The Class B space market remains tight, with vacancy much lower and rental rates competitive to Class A in some submarkets. With over 1 million square feet of Class A space to be delivered into the Washington, DC market and over half of the projects under construction already 50 percent or more preleased, vacancy will most likely remain steady. The Metropolitan Area saw overall positive absorption despite a decrease in leasing activity for the quarter. absorbed 722,376 square feet of space during the last quarter, primarily thanks to over 600,000 SF of absorption in Northern Virginia. Washington, DC saw positive absorption of 132,383 square feet and Maryland experienced negative absorption of 37,666 square feet. In an ongoing trend, Northern Virginia outper formed Suburban Maryland during the third quarter with Northern Virginia experiencing a 0.3 percent decrease in vacancy to 13.5 percent. In contrast, Suburban Maryland saw a 0.6 percent increase in vacancy to 14.6 percent. Throughout the Metropolitan Area, year-over-year results are mixed. In Washington, DC vacancy rates are almost 2 percentage points below 3Q 2010.

RENTAL RATES. While vacancy

for the Metropolitan Area decreased an insignificant amount, similar was the Metro Areas average rental rate increase of $0.01 per square foot. With such minimal adjustment in the average rental rate, it is no surprise that average rental rates for the Metro Area remain down from the years high. In Washington, DC, with vacancy decreasing ever so slightly, rental rates decreased an equally slight amount. Having fallen $0.51 per square foot, the change again is insignificant at 1.1 percent. Both Maryland and Virginia saw greater change, $0.19 and $0.21, respectively. Again, these changes are for the most part inconsequential. Year-over-year, the Metro Area has seen a $4.00 per square foot decrease in average rental rates, despite decreasing vacancy. The changes witnessed this quarter, in conjunction with 2Q 2011, reinforce that the Metropolitan Area, specifically Washington, DC has reached a level point of stability. While this period could be termed a period of stagnation or lack of growth, we may be close to equilibrium. With new product on line for delivery and active tenants in the market, Washington, DC will continue to see relatively stable vacancy while rental rates will most likely increase of the next year to two years as new Class A and trophy space is delivered and pulls the market up.

LEASING ACTIVITY.
ManTech International 2251 Corporate Park Dr Greater Fairfax County 109,736 SF U.S. Customs & Border Protection 90 K St NE Capitol Hill Area 96,000 SF Unknown Tenant 12220 Sunrise Valley Dr Greater Fairfax County 83,934 SF John Snow, Inc2 1616 N Fort Myer Dr R-B Corridor 79,780 SF Integrity Applications, Inc 15020 Conference Center Dr Greater Fairfax County 71,227 SF National Mining Association2 101 Constitution Ave NW Capitol Hill Area 52,670 SF Department of the Treasury2 1750 Pennsylvania Ave NW Downtown DC 52,028 SF Milbank, Tweed, Hadley & McCloy2 1850 K St NW Downtown DC 51,860 SF National Quality Forum 1030 15th St NW Downtown DC 43,028 SF TEOCO 12150 Monument Dr Greater Fairfax County 42,538 SF
1. UGL Services Client 2. Renewal/Expansion

Washington DC is stable rather than stagnant and slowly growing as the economy improves.

O F F I C E | 3 Q 2 0 11 Page 2

Average Asking Rent 13.6% 13.4% 13.2% 13.0% 12.8% 12.6% 12.4% 12.2% 12.0% 11.8%

Overall Vacancy $34.50 $34.00 $33.50 $33.00 $32.50 $32.00 $31.50

ASKING RENT VS VACANCY

DC, VA, MD Metro

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Deliveries 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 -1,000,000

Net Absorption

DELIVERIES VS NET ABSORPTION

DC, VA, MD Metro

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Direct Leasing 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0

Sublet Leasing

LEASING ACTIVITY
DC, VA, MD Metro

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

O F F I C E | 3 Q 2 0 11 Page 3

Average Asking Rent $50.00 $49.00 $48.00 $47.00 $46.00 $45.00 $44.00 $43.00 $42.00 $41.00 $40.00 $39.00

Overall Vacancy 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

ASKING RENT VS VACANCY

Washington, DC

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Overall Vacancy 16.0% 14.0% 12.0%

Availability

VACANCY VS AVAILABILITY
Washington, DC

10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

Class A $ Class A %

Class B $ Class B %

$60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $-

ASKING RENT VS VACANCY

Class A & B Washington, DC

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

O F F I C E | 3 Q 2 0 11 Page 4

Average Asking Rent 15.0% 14.5% 14.0% 13.5% 13.0% 12.5%

Overall Vacancy $30.00 $29.50 $29.00 $28.50 $28.00 $27.50 $27.00 $26.50

ASKING RENT VS VACANCY

Northern Virginia

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Net Absorption 1,000,000 800,000 600,000 400,000 200,000 0 -200,000 -400,000 -600,000

Average Asking Rent $30.00 $29.50 $29.00 $28.50 $28.00 $27.50 $27.00 $26.50

NET ABSORPTION VS ASKING RENT

Northern Virginia

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Class A $ Class A % $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $-

Class B $ Class B % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

ASKING RENT VS VACANCY

Northern Virginia

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

O F F I C E | 3 Q 2 0 11 Page 5

Average Asking Rent 15.2% 15.0% 14.8%

Overall Vacancy $27.50 $27.00 $26.50 $26.00 $25.50 $25.00

ASKING RENT VS VACANCY

Suburban Maryland

14.6% 14.4% 14.2% 14.0% 13.8% 13.6% 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Net Absorption 600,000 400,000 200,000

Average Asking Rent $27.50 $27.00 $26.50 $26.00 $25.50 $25.00

VACANCY VS AVAILABILITY
Suburban Maryland

0 (200,000) (400,000) (600,000) (800,000) (1,000,000) 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Class A $ $35.00 $30.00 Class A %

Class B $ Class B % 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

ASKING RENT VS VACANCY

Suburban Maryland

$25.00 $20.00 $15.00 $10.00 $5.00 $3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

O F F I C E | 3 Q 2 0 11 Page 6

Opportunities & Challenges

Assess and Adapt. LOOKING FORWARD.
As the Washington Metropolitan Area stabilizes and Washington, DC reaches a possible point of equilibrium, tenants will need to be strategic and look for alternative, nontraditional avenues for the upper hand. Vacancy and rental rates are shifting at levels of little or no statistical magnitude, so if the market has stabilized, yet there is fear, whats going to give? More than likely, terms. The terms of leases will be the focus over rental rates given the lack of trending in one direction or another. Landlords looking at single digit vacancy will find little incentive to negotiate on rental rates. Landlords with high vacancies will also look to the market for their negotiating power. As low-vacancy buildings fill, tenants will be forced to lesser occupied buildings, driving down vacancy and up rental rates. For tenants concerned about the economy and the possibility for growth or contraction in the near future, length of term, expansion, contraction, and termination clauses should all be looked at seriously. That is where they will find the flexibility they are looking for facing an unsure future. Landlords, equally concerned about the future, will most likely want to negotiate these terms as well so they can position themselves for whatever change the economy has in store. An optimistic landlord will be more willing to negotiate on the length of term and an expansion option as they would hope

for the economy to recover and leasing metrics to improvement similarly. A more pessimistic landlord, or one with a loan maturity approaching, will be less likely to negotiate as they will be looking for the solid, long-term income to use for cash flow and underwriting. As the impact of government cuts make a more measureable impact on the Washington Metropolitan Area, we may see continued fear about economic recovery and local stability. However, given recent growth in the private sector, it is possible that any cuts in government will be complimented by increases in private sector job growth and that Washington, DC will continue, although on a slower growth trajectory, on its path of stability.

Despite government cutbacks, the private sector in Washington, DC looks to be improving and thats good for commercial real estate. While that may mean a more competitive marketplace for tenants, it is a sign of economic improvement. Tenants who remain pessimistic and concerned for continued economic improvement will want to look for flexible lease terms that allow them to react effectively to economic changes. In a time of wait and see, Washington, DC looks to be stable and in some cases, near an equilibrium, which means tenants will need to be more resourceful and strategic with their real estate choices.

O F F I C E | 3 Q 2 0 11 Page 7

Investment Properties
Trends in Trades. RECENT TRADES.
Washington, DC remains among the top markets for investment, as many investors continue to focus on well-located, quality assets. The widely discussed flight to quality is perfectly realized in the Washington, DC market. However, as the number of quality assets in top-tier markets, like Washington, DC dwindle, and principle assets garner top dollar sale prices, investors are branching out to lowerpriced, slightly lower-quality assets in top or secondary markets. Particularly in the Washington Metro Area, the volume of transactions has slowly decreased since the first quarter of this year, while the amount per square foot that investors are willing to pay has steadily increased and now dropped again minutely. This would indicate that investors are still recognizing the area as a primary market for investment, but the number of investors willing to pay previously seen record prices has decreased slightly. With the local market continually proving its stability in the face of government cuts, investors will probably move towards lower quality Class B buildings with hopes of exploiting that shrinking market or with plans to renovate and upgrade. With well over $1.7 billion in assets sold in the third quarter and an average price per square foot of $184.45, the Washington Metro investment market is going strong. For tenants, this means a few things. Primarily, that the Washington Metro market is strong, not just for investors, but overall and appears to be stabilizing. With tenants and landlords equally concerned about the future and with the market stabilizing, the dynamics of leasing has shifted focus to lease terms. Landlords and investors concerned about the future will be looking to balance their concerns. They are primarily looking for flexibility in terms as they want to be ready to take advantage of the market when it improves and also want solid underwriting for potential refinancing.
3 Bethesda Metro Center Bethesda/Chevy Chase Class A 368,400 SF $150.1m / $407 Per square foot B: Brookfield Office Properties S: Meridian Group September 2011 93% Occupancy 1200 1st St NE Capitol Hill Area Class A 291,838 SF $149.5m / $512 Per square foot B: Principal Real Estate Investors S: VEF Advisors JV Polinger Shannon & Luchs Co July 2011 98% Occupancy 1616 N Fort Myer Dr R-B Corridor Class A 292,826 SF $145.4m / $297 Per square foot B: TIAA S: Beacon Capital Partners August 2011 98% Occupancy 1755-1764 Old Meadow Ln1 Greater Fairfax County Class B 259,236 SF $114.7m / $442 Per square foot B: AFL-CIO S: Dweck Management August 2011 98% Occupancy 1340 Braddock Pl Alexandria/I-395 Class B 286,927 SF $101m / $261 Per square foot B: WRIT S: MGP Real Estate LLC September 2011 92% Occupancy
1

Trade $ Vol (m) $3,000.00 $2,500.00 $2,000.00 $1,500.00 $1,000.00 $500.00 $0.00

Avg $ PSF $200.00 $180.00 $160.00 $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $0.00

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

*3Q11 based on available data through August 2011. Previously reported data corrected.

Part of a Portfolio Transaction

O F F I C E | 3 Q 2 0 11 Page 8

Quarterly Statistics
Leasing Fundamentals.
SUBMARKET INVENTORY (1) SQ FT OVERALL VACANCY (2) SQ FT RATE SUBLEASE VACANCY SQ FT RATE NET (3) UNDER AVERAGE (4) ABSORPTION CONSTRUCTION ASKING RENTS

Capitol Hill Area Class A Class B Class C Downtown DC Class A Class B Class C Georgetown/Uptown Class A Class B Class C Northeast/Southeast Class A Class B Class C DISTRICT OF COLUMBIA Class A Class B Class C

32,639,317 23,459,561 7,610,758 1,568,998 94,455,437 57,310,338 32,523,962 4,621,137 15,231,624 4,117,244 7,957,760 3,156,620 1,991,344 63,000 1,167,167 761,177 144,317,722 84,950,143 49,259,647 10,107,932

3,148,359 2,534,727 538,658 74,974 9,154,918 6,463,131 2,496,256 195,531 1,264,941 635,528 496,462 132,951 358,573 1,400 204,300 152,873 13,926,791 9,634,786 3,735,676 556,329

9.6% 10.8% 7.1% 4.8% 9.7% 11.3% 7.7% 4.2% 8.3% 15.4% 6.2% 4.2% 18.0% 2.2% 17.5% 20.1% 9.7% 11.3% 7.6% 5.5%

34,424 30,724 3,700 0 1,043,283 736,081 306,977 225 97,687 48,208 46,329 3,150 0 0 0 0 1,175,394 815,013 357,006 3,375

0.1% 0.1% 0.0% 0.0% 1.1% 1.3% 0.9% 0.0% 0.6% 1.2% 0.6% 0.1% 0.0% 0.0% 0.0% 0.0% 0.8% 1.0% 0.7% 0.0%

(371,419) (250,874) (100,636) (19,909) 446,090 680,680 (255,770) 21,180 57,161 5,074 31,415 20,672 551 0 34,600 (34,049) 132,383 434,880 (290,391) (12,106)

0 0 0 0 1,112,211 1,112,211 0 0 161,107 161,107 0 0 0 0 0 0 1,273,318 1,273,318 0 0

$48.73 $50.83 $40.43 $37.17 $51.28 $54.31 $44.37 $39.33 $38.98 $44.16 $34.42 $31.26 $23.43 $45.93 $23.95 $22.53 $42.63 $46.97 $32.93 $32.57

(1) Inventory defined as existing Class A, B and C office properties, 5,000 square foot minimum rentable base area inclusive of government owned and/or leased, ownedoccupied, medical (<75%), single, and multi-tenant buildings. (2) Overall vacancy inclusive of vacant direct and sublease space. (3) Net absorption defined as the change in physical occupancy from one period to the next. (4) Weighted average asking rents are gross per square foot, per year. Average asking rents are direct and weighted against the overall rentable building area.

O F F I C E | 3 Q 2 0 11 Page 9

Quarterly Statistics
Leasing Fundamentals.
SUBLEASE SUBMARKET Alexandria/I-395 Class A Class B Class C Dulles Corridor Class A Class B Class C East Falls Church Class A Class B Class C Greater Fairfax County Class A Class B Class C Greater Fredericksburg Class A Class B Class C Manassas/Rt 29/I-66 Class A Class B Class C Rosslyn-Ballston Corridor Class A Class B Class C SE Fairfax County Class A Class B Class C Woodbridge/I-95 Corridor Class A Class B Class C INVENTORY (1) SQ FT 38,460,665 19,011,812 16,481,186 2,967,667 54,699,805 38,360,569 15,351,728 987,508 849,361 300,000 290,464 258,897 60,200,440 33,028,901 24,257,722 2,913,817 5,541,540 1,334,913 3,390,491 816,136 5,439,344 893,125 3,766,482 779,737 23,537,207 15,732,709 6,675,295 1,129,203 7,392,749 1,729,418 4,625,971 1,037,360 3,228,244 323,172 2,401,373 503,699 OVERALL VACANCY (2) SQ FT RATE 4,505,929 3,051,731 1,367,301 86,897 8,593,482 5,765,070 2,726,801 101,611 64,673 2,500 2,900 59,273 8,482,311 4,452,950 3,824,077 205,284 742,096 250,257 435,606 56,233 782,731 186,216 561,722 34,793 2,501,264 1,403,878 988,561 108,825 705,828 76,872 598,686 30,270 501,882 33,229 391,481 77,172 11.7% 16.1% 8.3% 2.9% 15.7% 15.0% 17.8% 10.3% 7.6% 0.8% 1.0% 22.9% 14.1% 13.5% 15.8% 7.0% 13.4% 18.7% 12.8% 6.9% 14.4% 20.8% 14.9% 4.5% 10.6% 8.9% 14.8% 9.6% 9.5% 4.4% 12.9% 2.9% 15.5% 10.3% 16.3% 15.3% VACANCY SQ FT RATE 335,893 210,351 125,542 0 618,286 394,787 219,800 3,699 0 0 0 0 791,674 544,418 243,466 3,790 8,390 0 8,390 0 15,933 0 15,583 350 446,015 373,970 72,045 0 25,275 5,815 19,460 0 12,450 3,272 9,178 0 0.9% 1.1% 0.8% 0.0% 1.1% 1.0% 1.4% 0.4% 0.0% 0.0% 0.0% 0.0% 1.3% 1.6% 1.0% 0.1% 0.2% 0.0% 0.2% 0.0% 0.3% 0.0% 0.4% 0.0% 1.9% 2.4% 1.1% 0.0% 0.3% 0.3% 0.4% 0.0% 0.4% 1.0% 0.4% 0.0% NET (3) UNDER AVERAGE (4) ABSORPTION CONSTRUCTION ASKING RENTS (449,803) (271,742) (358,791) 180,730 253,522 598,310 (350,494) 5,706 10,492 0 3,492 7,000 158,817 417,916 (228,295) (30,804) 3,046 8,945 14,643 (20,542) 5,333 32,002 (37,091) 10,422 604,005 268,561 (272,146) 607,590 63,279 37,595 22,901 2,783 (21,032) 57,517 (98,348) 19,799 15,000 0 15,000 0 100,000 100,000 0 0 0 0 0 0 94,873 94,873 0 0 170,000 170,000 0 0 45,000 45,000 0 0 1,329,086 1,329,086 0 0 751,147 751,147 0 0 0 0 0 0 $34.64 $36.30 $31.57 $24.73 $26.22 $28.45 $21.69 $21.26 $31.74 $37.99 $33.41 $31.39 $28.98 $32.20 $25.51 $23.75 $22.43 $25.48 $21.17 $18.66 $21.87 $25.05 $21.09 $17.46 $39.50 $40.52 $38.94 $31.32 $26.50 $37.30 $25.58 $17.19 $21.38 $27.26 $20.83 $21.62

NORTHERN VIRGINIA
Class A Class B Class C

199,349,355
110,714,619 77,240,712 11,394,024

26,880,196
15,222,703 10,897,135 760,358

13.5%
13.7% 14.1% 6.7%

2,253,916
1,532,613 713,464 7,839

1.1%
1.4% 0.9% 0.1%

627,659
1,149,104 (1,304,129) 782,684

2,505,106
2,490,106 15,000 0

$29.74
$32.28 $26.64 $23.04 O F F I C E | 3 Q 2 0 11 P age 10

Quarterly Statistics
Leasing Fundamentals.
SUBMARKET INVENTORY (1) SQ FT OVERALL VACANCY (2) SQ FT RATE SUBLEASE VACANCY SQ FT RATE NET (3) UNDER AVERAGE (4) ABSORPTION CONSTRUCTION ASKING RENTS

Bethesda/Chevy Chase Class A Class B Class C I-270 Corridor Class A Class B Class C N Prince George's County Class A Class B Class C SE Montgomery County Class A Class B Class C SUBURBAN MARYLAND Class A Class B Class C DC-VA-MD METRO Class A Class B Class C

11,812,507 5,495,216 5,399,417 917,874 41,961,162 20,140,837 17,869,201 3,951,124 18,678,771 6,891,600 9,383,080 2,404,091 12,577,270 5,530,441 5,625,633 1,421,196 85,029,710 38,058,094 38,277,331 8,694,285 428,696,787 233,722,856 164,777,690 30,196,241

1,160,107 540,100 468,997 151,010 6,101,831 3,351,345 2,434,063 316,423 3,558,154 1,418,934 1,952,651 186,569 1,599,939 494,098 905,509 200,332 12,420,031 5,804,477 5,761,220 854,334 53,227,018 30,661,966 20,394,031 2,171,021

9.8% 9.8% 8.7% 16.5% 14.5% 16.6% 13.6% 8.0% 19.0% 20.6% 20.8% 7.8% 12.7% 8.9% 16.1% 14.1% 14.6% 15.3% 15.1% 9.8% 12.4% 13.1% 12.4% 7.2%

185,088 149,149 33,774 2,165 361,345 253,796 100,149 7,400 55,791 44,017 11,774 0 100,169 51,957 34,729 13,483 702,393 498,919 180,426 23,048 4,131,703 2,846,545 1,250,896 34,262

1.6% 2.7% 0.6% 0.2% 0.9% 1.3% 0.6% 0.2% 0.3% 0.6% 0.1% 0.0% 0.8% 0.9% 0.6% 0.9% 0.8% 1.4% 0.5% 0.3% 1.0% 1.2% 0.8% 0.1%

(150,215) (72,121) (68,631) (9,463) 191,478 325,689 (75,001) (59,210) (75,192) 125,703 (183,921) (16,974) (3,737) 93,007 (110,070) 13,326 (37,666) 472,278 (437,623) (72,321) 722,376 2,056,262 (2,032,143) 698,257

0 0 0 0 750,560 750,560 0 0 268,762 268,762 0 0 0 0 0 0 1,019,322 1,019,322 0 0 4,797,746 4,782,746 15,000 0

$34.14 $37.76 $33.07 $24.49 $27.96 $31.52 $23.92 $21.27 $20.39 $20.88 $20.27 $17.95 $25.78 $31.10 $23.95 $20.93 $27.36 $30.32 $25.30 $21.16 $32.59 $36.52 $28.29 $25.59

(1) Inventory defined as existing Class A, B and C office properties, 5,000 square foot minimum rentable base area inclusive of government owned and/or leased, ownedoccupied, medical (<75%), single, and multi-tenant buildings. (2) Overall vacancy inclusive of vacant direct and sublease space. (3) Net absorption defined as the change in physical occupancy from one period to the next. (4) Weighted average asking rents are gross per square foot, per year. Average asking rents are direct and weighted against the overall rentable building area.

O F F I C E | 3 Q 2 0 11 P a g e 11

UGL Services
SERVICE LINES.
Portfolio Management We optimize corporate real estate assets by focusing on overall performance of client portfolios. Transaction Advisory As the worlds largest corporate real estate firm exclusively focused on users of business space, we assure you of conflict-free representation. Data Management Our data management professionals help turn data into actionable information for reducing occupancy costs, managing key dates, and tracking asset inventories. Audit & Recovery We help recover funds and prevent future overpayments, enabling our clients to invest more into their businesses. Corporate Finance Our finance professionals bring a powerful combination of capital management, corporate finance expertise and negotiating skills to financial structuring and transaction processes. Facility Management We offer a single point of contact for optimizing the operations of complex facilities. Workplace Integration Our professionals develop and execute solutions that maximize space usage by aligning our clients organizational processes and cultural sensitivities with their business objectives. Project Services Our project teams manage and control capital outlays for maintenance, repairs and operations in order to meet performance objectives. Strategic Consulting The portfolio analyses we provide allows the optimal real estate plan to be engineered for specific markets, goals or industries. Site Selection & Incentives Consulting. Location analysis and applicable government incentive programs.

WHO WE ARE. A multidiscipline, integrated corporate real estate services

firm that focuses exclusively on the users of space. Our strategic solutions align our clients real estate with their business strategies, creating competitive advantage.

ABOUT US. UGL Services, through its affiliated companies, is a global corporate real estate firm that focuses exclusively on the business space user. With more than 40,000 affiliated employees in nearly 100 locations around the world, Chicago-based UGL Services provides comprehensive real estate solutions through portfolio strategy and management, transaction advisory, corporate finance, project services, workplace integration, data management, facility management and audit & recovery services for national and global companies with office, industrial and retail opportunities throughout the United States, Mexico, Asia Pacific, Europe and the Middle East. UGL Services is a subsidiary of UGL Limited, (ASX: UGL).

OWNERSHIP. UGL Services acquisition by UGL Limited has created the

worlds largest conflict-free corporate real estate services firm. Our union combines the strengths of both American and Australian firms while it brings added financial stability and increased executive leadership. We remain committed to maintaining the quality, processes, procedures, approach and other expertise for which UGL Services built its renown while increasing our global services reach.

CLIENTS. UGL Services manages more than 80 client real estate portfolios
covering 43 countries and totaling nearly 650 million square feet.

O F F I C E | 3 Q 2 0 11 P a g e 12

Transaction Advisory
WASHINGTON DC
3000 K Street, NW, Suite 200 Washington, DC 20007 T: 202.293.9556 F: 202.293.9557

BROKERAGE TEAM
Craig Estey, EVP, Managing Director craig.estey@na.ugllimited.com 202.721.2355 Catherine Jones, SVP catherine.jones@na.ugllimited.com 202.721.2358 Daniel Rasmussen, SVP daniel.rasmussen@na.ugllimited.com 202.721.2342 Michael Wiley, SVP michael.wiley@na.ugllimited.com 202.721.2345 Will Courtney, Senior Associate will.courtney@na.ugllimited.com 202.721.2343 Colin Oppenheimer, Senior Associate colin.oppenheimer@na.ugllimited.com 202.721.2350 Andrew Roberts, Transaction Specialist andrew.roberts@na.ugllimited.com 202.280.6994 Michael Christian, EVP mike.christian@na.ugllimited.com 202.721.2341 Brian Liss, SVP brian.liss@na.ugllimited.com 202.280.6982 Junius Tillery, SVP junius.tillery@na.ugllimited.com 202.721.2351 Chet Rao, VP chet.rao@na.ugllimited.com 202.721.2347 Reza Ghassabeh, Senior Associate reza.ghassabeh@na.ugllimited.com 202.721.2359 Mary Catherine Williams, Senior Associate mc.williams@na.ugllimited.com 202.721.2346 Matthew Siegel, SVP matthew.siegel@na.ugllimited.com 202.721.2348 Aaron Pomerantz, SVP aaron.pomerantz@na.ugllimited.com 202.280.6993 Sandy Weiss, SVP sandy.weiss@na.ugllimited.com 202.280.6992 Stephen Ross, VP stephen.ross@na.ugllimited.com 202.721.2352 Greg Millwater, Senior Associate greg.millwater@na.ugllimited.com 202.280.6983 Brian Dickerson, Associate brian.dickerson@na.ugllimited.com 202.721.2349

CAM TEAM
Peter Brohoski, SVP peter.brohoski@na.ugllimited.com 202.280.6984 Susan Stoudt, SVP, SPM susan.stoudt@na.ugllimited.com 202.721.2344 Matthew Attaway, AVP matthew.attaway@na.ugllimited.com 202.721.2340 Bill Evans, SVP bill.evans@na.ugllimited.com 202.280.6988 David Lamore, VP david.lamore@na.ugllimited.com 202.280.6989 Denise Harris, COE Technical Specialist denise.harris@na.ugllimited.com 202.280.6981 Christopher Reutershan, SVP chris.reutershan@na.ugllimited.com 202.280.6980 Erika Gilmore, VP erika.gilmore@na.ugllimited.com 202.721.2354

Copyright 2011 UGL Services. The aforementioned information was obtained from sources deemed reliable. UGL Services makes no representation or warranty concerning the accuracy or completeness of the information. Data Sources: UGL Services Research, CoStar Group, REIS, Real Capital Analytics, Bureau of Labor Statistics and Moodys.