Manulife US REIT - Annual Report 2021

MANULIFE US REIT 52 • Regional employment is just 0.2% below its pre-pandemic peak, while unemployment has fallen even faster to 2.2% as of November 2021. • Midtown continues to benefit from large-scale tech, professional services and creative users expanding within the market, in large part from corporate in-migration. • Both Buckhead and Midtown are ahead of the curve in terms of the regional office market recovery. • A robust construction pipeline will keep options open, but competition will be intense given flight-to-quality and sustained population and employment growth. Office Market Trends Buckhead and in particular Midtown remain the focal points of office market activity in Atlanta and have been two of the fastest submarkets to rebound since the onset of the pandemic. After a slew of large deals closing in the first half of 2021, transactions fell largely within the 50,000-100,000-square-foot bracket, led by deals from Swift Currie, Novelis and Cisco. Notably, Novelis will be relocating its global headquarters within Buckhead from Two Alliance to Simon Property Group’s redeveloped One Phipps Plaza. Combined, Buckhead and Midtown registered 421,556 sq ft of net occupancy loss over the course of 2021, bringing vacancy to 23.1%. Despite this sharp upswing over the course of the pandemic, this is still below the market-wide vacancy rate of 23.3%, while Buckhead and Midtown have seen three consecutive quarters of positive net absorption compared to two quarters for Atlanta as Overall market statistics Forecast YTD net absorption (s.f.) -2,826,731 Under construction (s.f.) 4,267,615 Total vacancy (%) 23.3% Sublease vacancy (s.f.) 2,376,524 Asking rent ($ p.s.f.) US$31.20 Concessions Stable Despite increase, vacancy below financial crisis levels 1.5 25% 20% 15% 10% 1.0 0.5 0.0 -0.5 2008 2009 2012 2013 2016 2017 2010 2011 2014 2015 2018 2019 2020 2021 Net absorption (m.s.f.) Total vacancy (%) 2022 2024 2023 2025 Buckhead/Midtown capture the majority of construction Buckhead and Midtown Rest of market 1,765,001 1,958,102 544,512 2008 2009 2012 2013 2016 2017 2010 2011 2014 2015 2018 2019 2020 2021 Class A cap rates continue to drop 9% 8% 7% 6% 5% 4% CBD Class A cap rate (%) Atlanta (Buckhead & Midtown) Table refers to overall market, while charts refer to Manulife submarkets Independent Market Report By JLL as at 31 December 2021