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EQUITY OFFICE'S 2006 PUGET SOUND FORECAST:
OFFICE MARKET STRENGHTENS; LOW UNEMPLOYMENT
AND STEADY JOB GROWTH DRIVES INVESTMENT

  • Region's largest landlord sees regional rebound; Bellevue market leads the way

SEATTLE, WA – October 27, 2005
Equity Office today unveiled its 2006 Puget Sound Region Forecast, which predicts an upswing in the commercial real estate market for Seattle and Bellevue throughout 2006.

“The Seattle CBD is successfully absorbing the 1.1 million square feet of office scheduled to come online in 2006 with the completion of the Washington Mutual Tower," said Equity Office's Seattle Senior Vice President Patrick Callahan. "Bellevue is poised to see the biggest changes in 2006 - driven by low vacancy rates and several sizable mixed-use and office developments.”

Regional Overview: Job growth fuels local economy;
Region will see a return to its 2001 strength

  • Employment growth in the region continues to outpace the national average, at 2.8 percent over the past year.

  • The local economy, fueled by continued growth from Microsoft, Boeing and other major employers, is expected to surpass its former 2001 jobs peak by early 2006.

  • These gains have pushed down the local unemployment rate to about 5 percent.

  • Professional and business services and manufacturing are leading the growth.
    • Office job growth is expected to outpace the national average throughout the remainder of this year.

    • Furthermore, we expect to see healthy growth of office jobs through 2006-2007.

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    Vacancy Rates: Seattle vacancy rates decline to 12.5 percent; Bellevue vacancy falls to nearly 8 percent

Seattle

  • Seattle's robust economy has lowered vacancies over the past year in metro and all major submarkets.
    • After a sluggish start to 2005, the Seattle metro vacancy is expected to end the year at approximately 12.5 percent.

    • The Seattle MSA is at 86 percent.

    • From first to second quarter Seattle enjoyed the largest quarterly decline the market has seen in nearly eight years.

    • It is expected, however, that the Seattle metro vacancy will rise slightly with the delivery of the new Washington Mutual Tower.

    • Because of this rental rates in the Seattle CBD are expected to remain flat.

    • The good news is that large blocks of space are slowly diminishing and activity among small businesses continues.

    • A flight to quality continues, as companies desire space in Class A buildings.

Bellevue

  • Bellevue continues to be the regional starlet, with vacancies down to about 8.2 percent.
    • As a result, rents are approaching the $29 to $30 range, which is nearly a 20 percent increase since 2003.

    • The Bellevue MSA is at 87 percent.

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    Absorption: Demand High in Seattle and Bellevue

Seattle

  • With a variety of employment sectors posting strong growth, net absorption is evenly distributed throughout the region.

  • Office-using employment growth in Seattle and Bellevue has been stellar.
    • Absorption has turned positive with Seattle achieving its highest demand levels since 2002, with 1.1 million square feet in the second quarter of 2005 alone.

    • Demand is expected to continue through the remainder of 2005 and continue to increase next year.

    • Large growth in the business and professional services sectors are driving this push in the metro areas, coupled with the increase in manufacturing absorbing space in the submarkets.

    • We'll continue to see noteworthy companies seek space in Bellevue as this market continues to reinvent itself and offer attractive market characteristics: solid transportation system, good amenities, strong work force.

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    Completions: Developers holding out for
    anticipated Seattle upzone; Bellevue takes off

Seattle

  • Anticipation of a 2006 downtown upzone has stirred early positioning by developers in the commercial marketplace.
    • Because of this, residential development has stayed ahead of commercial development, with nearly 25 projects permitted or in early construction in the downtown core and adjacent neighborhoods.

    • Only 390,000 square feet of completions are scheduled for the second half of 2005.

    • 2006 will be a different scenario with 2.2 million square feet forecasted for the Seattle metro.

  • The largest commercial project currently underway is the Washington Mutual tower, slated to deliver 890,000 square feet to the Seattle CBD in 2006. This delivery initially slowed construction in the Seattle CBD until recently.

Bellevue

  • Bellevue has seen office projects like Lincoln Tower attract majority tenants and move forward with construction, and with several additional projects in for permitting, development in 2006 will occur.

  • Local developers have recently announced major mixed-use projects in the downtown core bringing additional retail and office space to the CBD.

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    Investment Activity: Continued flow of capital into Seattle, Bellevue - Transportation remains an issue
  • Despite some near-term risks, institutional investors have flooded the Seattle CBD submarket.

  • With strong investor interest, values ramped up in 2004, and will grow steadily in 2006.

  • Quality of life will soon become a deciding factor for employers considering the Puget Sound region.

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ABOUT EQUITY OFFICE
Equity Office Properties Trust (NYSE:EOP), operating through its various subsidiaries and affiliates, is the nation's largest publicly held office building owner and manager with a total office portfolio of 611 buildings comprising 113.6 million square feet in 18 states and the District of Columbia. Equity Office has an ownership presence in 26 Metropolitan Statistical Areas (MSAs) and in 105 submarkets, enabling it to provide a wide range of office solutions for local, regional and national customers. For more company information visit the Equity Office Web site at http://www.equityoffice.com.
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