FY 2021 Results: Analyst and Media Briefing

MUST Insights: From recovery to growth in the U.S. office market

March 2022

U.S. office market trends

Green shoots in

demand

• Four consecutive quarters of increased office leasing velocity, driven principally by the tech sector
• Sublease space plateauing
• Positive net absorption for the first time since the onset of the pandemic in Q4 2021

Migration of talent

• Employers are struggling with retention and wage inflation given acute labor shortages
• Housing affordability and quality of life driving workforce migration to the Sun Belt and Mountain West
• HQ relocations and hub-and- spoke expansions becoming increasingly popular

Hybrid work

• Office re-entry is gradually rising - currently 36% of pre- pandemic levels
• Employers are finalizing hybrid work policies - with many allowing 2 days per week of locational flexibility
• Efficacy of hybrid work remains uncertain, with a discovery process now underway

Flight to quality

• Tenants are gravitating to best- in-class space
• Newly delivered assets registered 52 million s.f. of occupancy gains since onset of the pandemic vs. 148 million s.f. of losses among commodity assets
• Rents for top-quality space up 15% vs. 10% decline for the commodity segment

Office re-entry patterns and forecast

U.S. office occupancy vs. pre-pandemic normal (%)

100%	8%
	December 14, 2020: first
90%
	COVID-19 vaccine
		administered in the U.S.						35%
80%
								55%	50%
70%						60%	60%
				65%
60%		79%	74%	77%	74%		75%

92%

50%

92%

40%

30%								65%
							45%	50%
20%					40%	40%
			35%
10%	21%	26%	23%	26%		25%

8%

0%

Jan-20Apr-20Jul-20Oct-20Jan-21Apr-21Jul-21Oct-21Jan-22Apr-22Jul-22Oct-22Jan-23

Office occupancy comparison

Market	Feb 2022 est.
Austin	52%
Dallas	47%
Houston	50%
New York	31%
Chicago	32%
San Francisco	25%
Los Angeles	33%
Washington, DC	32%
Silicon Valley	27%

Source: Kastle Systems

In-office Remote

Projected

Office attendance is currently 36% of pre-pandemic levels, with Sun Belt markets leading dense urban gateways.

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Overall office leasing activity continues to rebound

	80,000,000
	70,000,000
(s.f.)									59.9 million s.f.								+ 60%
60,000,000
activity
50,000,000																				From trough
leasing	40,000,000
office	30,000,000
U.S. quarterly
20,000,000	51,601,230	61,497,397	60,686,234	56,144,428	55,796,348	57,832,467	62,494,619	61,447,311	56,815,039	58,964,533	62,834,071	62,457,684	68,813,611	63,986,471	59,687,423	57,982,530	50,630,252	27,893,891	30,366,705	28,068,376	32,719,643	38,706,022	40,873,582	44,634,337
10,000,000
0
		2016				2017				2018				2019				2020				2021

Leasing activity rose 9% last quarter, marking the fourth consecutive quarterly increase - while overall volume is up 60% from the trough, levels remain almost 30% below pre-pandemic norms

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Tech sector fueling U.S. office demand

Seattle/Bellevue

• Amazon (1.8 m.s.f.)
• Meta (558,000 s.f.)
• Microsoft (246,638 s.f.)
• Blue Origin (92,834 s.f.)

Los Angeles

• Netflix (538,145 s.f.)
• Amazon (373,156 s.f.)
• Hulu (351,000 s.f.)
• Riot Games (199,882 s.f.)

San Diego

• Apple (591,511 s.f.)
• BD (318,000 s.f.)
• Google (115,285 s.f.)
• Resilience (49,130 s.f.)

Notable leasing activity since Q1 2020

Austin

• Meta (589,000 s.f.)
• Samsung (189,967 s.f.)
• Atlassian (157,540 s.f.)
• TikTok (126,429 s.f.)

Boston

• Amazon (630,000 s.f.)
• Whoop (121,682 s.f.)
• Insulet (119,060 s.f.)
• Hubspot (116,007 s.f.)

New York

• Meta (730,000 s.f.)
• Roku (237,333 s.f.)
• TikTok (232,188 s.f.)
• Apple (220,000 s.f.)

Raleigh

• Biogen (102,972 s.f.)
• Merz (79,162 s.f.)
• Bioventus (52,101 s.f.)
• Carsgen (36,590 s.f.)

Atlanta

• Microsoft (523,511 s.f.)
• MailChimp (300,000 s.f.)
• CGHI (116,993 s.f.)
• Cisco (93,389 s.f.)

Miami

• Wix (48,148 s.f.)
• Microsoft (43,885 s.f.)

Tech companies are expanding beyond the Bay Area to satellite markets

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