----

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| R      | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  |
|--------|------------------------------------------------------------------------------------------|
|   | For Quarterly Period Ended September 30, 2010                                            |
|   | or                                                                                       |
| £ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|   | For the Transition Period from__________ to __________                                   |

| Maryland                        |   | 74-2123597                        |
|---------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of |   | (IRS Employer Identification No.) |
| incorporation or organization)  |   |                              |

|   | P.O. Box 24647 |
|--------|----------------|

|   | Registrant’s telephone number, including area code (601) 948-4091 |
|--------|-------------------------------------------------------------------------|

|   | Registrant’s web site www.pky.com |
|--------|-----------------------------------------|

| Large accelerated filer £ | Accelerated filer R | Non-accelerated filer £                  | Smaller reporting company £ |
|--------------------------------|---------------------|-----------------------------------------------|----------------------------------|
|                           |                | (Do not check if a smaller reporting company) |                             |

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|                          |   |                                                                                        | Page   |
|-------------------------------|--------|---------------------------------------------------------------------------------------------|--------|
| Part I. Financial Information |
| Item 1.                       |   | Financial Statements                                                                        |   |
|                          |   |                                                                                        |   |
|                          |   | Consolidated Balance Sheets, September 30, 2010 and December 31, 2009                       | 3      |
|                          |   |                                                                                        |   |
|                          |   | Consolidated Statements of Operations for the Three Months and Nine Months Ended            |   |
|                          |   | September 30, 2010 and 2009                                                                 | 4      |
|                          |   |                                                                                        |   |
|                          |   | Consolidated Statement of Changes in Equity for the Nine Months Ended                       |   |
|                          |   | September 30, 2010                                                                          | 6      |
|                          |   |                                                                                        |   |
|                          |   | Consolidated Statements of Cash Flows for the Nine Months Ended                             |   |
|                          |   | September 30, 2010 and 2009                                                                 | 7      |
|                          |   |                                                                                        |   |
|                          |   | Notes to Consolidated Financial Statements                                                  | 8      |
|                          |   |                                                                                        |   |
| Item 2.                       |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23     |
|                          |   |                                                                                        |   |
| Item 3.                       |   | Quantitative and Qualitative Disclosures About Market Risk                                  | 39     |
|                          |   |                                                                                        |   |
| Item 4.                       |   | Controls and Procedures                                                                     | 39     |
|                          |   |                                                                                        |   |
|                          |   |                                                                                        |   |
| Part II. Other Information    |
|                          |   |                                                                                        |   |
|                          |   |                                                                                        |   |
| Item 1.                       |   | Legal Proceedings                                                                           | 40     |
|                          |   |                                                                                        |   |
| Item 1A.                      |   | Risk Factors                                                                                | 40     |
|                          |   |                                                                                        |   |
| Item 2.                       |   | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 40     |
|                          |   |                                                                                        |   |
| Item 6.                       |   | Exhibits                                                                                    | 40     |
|                          |   |                                                                                        |   |
|                          |   |                                                                                        |   |
| Signatures                    |
|                          |   |                                                                                        |   |
| Authorized Signatures         | 40     |

----

|                                                                                                                                                                                                         |   |      September 30 |      |   |     December 31 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|--------|--------------------------------|--------|
|                                                                                                                                                                                                         |   |      2010         |      |   |      2009  |   |
|                                                                                                                                                                                                         |   |      (Unaudited)  |      |   |                           |   |
| Assets                                                                                                                                                                                                       |   |                                  |      |   |                           |   |
| Real estate related investments:                                                                                                                                                                             |   |                                  |      |   |                           |   |
| Office and parking properties                                                                                                                                                                                |   | $                                     | 1,776,281 |   |                           | $      | 1,738,040 |   |
| Land held for development                                                                                                                                                                                    |   |                                  | 609       |   |                           |   | 609 |   |
| Accumulated depreciation                                                                                                                                                                                     |   |                                  | (373,789  | )      |                           |   | (336,759 | ) |
|                                                                                                                                                                                                         |   |                                  | 1,403,101 |   |                           |   | 1,401,890 |   |
|                                                                                                                                                                                                         |   |                                  |      |   |                           |   |   |   |
| Land available for sale                                                                                                                                                                                      |   |                                  | 750       |   |                           |   | 750 |   |
| Mortgage loans                                                                                                                                                                                               |   |                                  | 10,148    |   |                           |   | 8,126 |   |
| Investment in unconsolidated joint ventures                                                                                                                                                                  |   |                                  | 2,805     |   |                           |   | 2,512 |   |
|                                                                                                                                                                                                         |   |                                  | 1,416,804 |   |                           |   | 1,413,278 |   |
|                                                                                                                                                                                                         |   |                                  |      |   |                           |   |   |   |
| Rents receivable and other assets                                                                                                                                                                            |   |                                  | 123,836   |   |                           |   | 116,437 |   |
| Intangible assets, net                                                                                                                                                                                       |   |                                  | 51,326    |   |                           |   | 61,734 |   |
| Cash and cash equivalents                                                                                                                                                                                    |   |                                  | 29,099    |   |                           |   | 20,697 |   |
|                                                                                                                                                                                                         |   | $                                     | 1,621,065 |   |                           | $      | 1,612,146 |   |
|                                                                                                                                                                                                         |   |                                  |      |   |                           |   |   |   |
|                                                                                                                                                                                                         |   |                                  |      |   |                           |   |   |   |
| Liabilities                                                                                                                                                                                                  |   |                                  |      |   |                           |   |   |   |
| Notes payable to banks                                                                                                                                                                                       |   | $                                     | 100,000   |   |                           | $      | 100,000 |   |
| Mortgage notes payable                                                                                                                                                                                       |   |                                  | 815,452   |   |                           |   | 852,700 |   |
| Accounts payable and other liabilities                                                                                                                                                                       |   |                                  | 97,595    |   |                           |   | 88,614 |   |
|                                                                                                                                                                                                         |   |                                  | 1,013,047 |   |                           |   | 1,041,314 |   |
|                                                                                                                                                                                                         |   |                                  |      |   |                           |   |   |   |
|                                                                                                                                                                                                         |   |                                  |      |   |                           |   |   |   |
| Equity                                                                                                                                                                                                       |   |                                  |      |   |                           |   |   |   |
| Parkway Properties, Inc. stockholders’ equity:                                                                                                                                                         |   |                                  |      |   |                           |   |   |   |
| 8.00% Series D Preferred stock,  $.001 par value,                                                                                                                                                  |   |                                  |      |   |                           |   |   |   |
|      4,374,896 and 2,400,000 shares authorized, issued and                                                                                                                          |   |                                  |      |   |                           |   |   |   |
|      outstanding in 2010 and 2009, respectively                                                                                                                                     |   |                                  | 102,873   |   |                           |   | 57,976 |   |
| Common stock, $.001 par value, 65,624,104 and  67,600,000 shares authorized in 2010 and 2009, respectively, 21,920,720 and 21,624,228 shares issued and outstanding in 2010 and 2009, respectively |   |                                  | 22        |   |                           |   | 22 |   |
| Common stock held in trust, at cost, 58,134 and 71,255                                                                                                                                                       |   |                                  |      |   |                           |   |   |   |
|      shares in 2010 and 2009, respectively                                                                                                                                          |   |                                  | (1,896    | )      |                           |   | (2,399 | ) |
| Additional paid-in capital                                                                                                                                                                                   |   |                                  | 515,747   |   |                           |   | 515,398 |   |
| Accumulated other comprehensive loss                                                                                                                                                                         |   |                                  | (4,457    | )      |                           |   | (4,892 | ) |
| Accumulated deficit                                                                                                                                                                                          |   |                                  | (113,555  | )      |                           |   | (111,960 | ) |
| Total Parkway Properties, Inc. stockholders’ equity                                                                                                                                                    |   |                                  | 498,734   |   |                           |   | 454,145 |   |
| Noncontrolling interest - real estate partnerships                                                                                                                                                           |   |                                  | 109,284   |   |                           |   | 116,687 |   |
| Total equity                                                                                                                                                                                                 |   |                                  | 608,018   |   |                           |   | 570,832 |   |
|                                                                                                                                                                                                         |   | $                                     | 1,621,065 |   |                           | $      | 1,612,146 |   |

----

|                                                                                                   |   | Three Months Ended |    |
|--------------------------------------------------------------------------------------------------------|--------|--------------------|---------|
|                                                                                                   |   | September 30       |    |
|                                                                                                   |   | 2010               |    |   | 2009 |   |
|                                                                                                   |   | (Unaudited)        |    |
| Revenues                                                                                               |   |               |    |   |   |   |
| Income from office and parking properties                                                              |   | $                  | 61,567  |   |   | $ | 65,617 |   |
| Management company income                                                                              |   |               | 585     |   |   |   | 340 |   |
| Total revenues                                                                                         |   |               | 62,152  |   |   |   | 65,957 |   |
|                                                                                                   |   |               |    |   |   |   |   |   |
| Expenses                                                                                               |   |               |    |   |   |   |   |   |
| Property operating expenses                                                                            |   |               | 29,332  |   |   |   | 31,172 |   |
| Depreciation and amortization                                                                          |   |               | 21,126  |   |   |   | 23,240 |   |
| Management company expenses                                                                            |   |               | 858     |   |   |   | 577 |   |
| General and administrative                                                                             |   |               | 1,817   |   |   |   | 1,783 |   |
| Total expenses                                                                                         |   |               | 53,133  |   |   |   | 56,772 |   |
|                                                                                                   |   |               |    |   |   |   |   |   |
| Operating income                                                                                       |   |               | 9,019   |   |   |   | 9,185 |   |
|                                                                                                   |   |               |    |   |   |   |   |   |
| Other income and expenses                                                                              |   |               |    |   |   |   |   |   |
| Interest and other income                                                                              |   |               | 355     |   |   |   | 672 |   |
| Equity in earnings of unconsolidated joint ventures                                                    |   |               | 61      |   |   |   | 48 |   |
| Gain on involuntary conversion                                                                         |   |               | 40      |   |   |   | - |   |
| Interest expense                                                                                       |   |               | (13,669 | ) |   |   | (13,672 | ) |
|                                                                                                   |   |               |    |   |   |   |   |   |
| Loss from continuing operations                                                                        |   |               | (4,194  | ) |   |   | (3,767 | ) |
| Discontinued operations:                                                                               |   |               |    |   |   |   |   |   |
|     Income from discontinued operations                                            |   |               | 6       |   |   |   | 105 |   |
| Net loss                                                                                               |   |               | (4,188  | ) |   |   | (3,662 | ) |
| Net loss attributable to noncontrolling interest – real estate partnerships                      |   |               | 2,356   |   |   |   | 2,107 |   |
|                                                                                                   |   |               |    |   |   |   |   |   |
| Net loss for Parkway Properties, Inc.                                                                  |   |               | (1,832  | ) |   |   | (1,555 | ) |
| Dividends on preferred stock                                                                           |   |               | (1,737  | ) |   |   | (1,200 | ) |
| Net loss attributable to common stockholders                                                           |   | $                  | (3,569  | ) |   | $ | (2,755 | ) |
|                                                                                                   |   |               |    |   |   |   |   |   |
| Net loss per common share attributable to Parkway Properties, Inc.:                                    |   |               |    |   |   |   |   |   |
| Basic:                                                                                                 |   |               |    |   |   |   |   |   |
|      Loss from continuing operations attributable to Parkway Properties, Inc. |   | $                  | (0.17   | ) |   | $ | (0.13 | ) |
|      Income from discontinued operations                                      |   |               | -       |   |   |   | - |   |
|      Basic net loss attributable to Parkway Properties, Inc.                  |   | $                  | (0.17   | ) |   | $ | (0.13 | ) |
| Diluted:                                                                                               |   |               |    |   |   |   |   |   |
|      Loss from continuing operations attributable to Parkway Properties, Inc. |   | $                  | (0.17   | ) |   | $ | (0.13 | ) |
|      Income from discontinued operations                                      |   |               | -       |   |   |   | - |   |
|      Diluted net loss attributable to Parkway Properties, Inc.                |   | $                  | (0.17   | ) |   | $ | (0.13 | ) |
|                                                                                                   |   |               |    |   |   |   |   |   |
| Weighted average shares outstanding:                                                                   |   |               |    |   |   |   |   |   |
| Basic                                                                                                  |   |               | 21,438  |   |   |   | 21,313 |   |
| Diluted                                                                                                |   |               | 21,438  |   |   |   | 21,313 |   |

----

|                                                                                                   |   | Nine Months Ended |    |
|--------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                                                   |   | September 30      |    |
|                                                                                                   |   | 2010              |    |   | 2009 |   |
|                                                                                                   |   | (Unaudited)       |    |
| Revenues                                                                                               |   |              |    |   |   |   |
| Income from office and parking properties                                                              |   | $                 | 192,614 |   |   | $ | 198,210 |   |
| Management company income                                                                              |   |              | 1,331   |   |   |   | 1,486 |   |
| Total revenues                                                                                         |   |              | 193,945 |   |   |   | 199,696 |   |
|                                                                                                   |   |              |    |   |   |   |   |   |
| Expenses                                                                                               |   |              |    |   |   |   |   |   |
| Property operating expenses                                                                            |   |              | 89,978  |   |   |   | 95,767 |   |
| Depreciation and amortization                                                                          |   |              | 65,257  |   |   |   | 68,246 |   |
| Management company expenses                                                                            |   |              | 2,243   |   |   |   | 1,710 |   |
| General and administrative                                                                             |   |              | 5,537   |   |   |   | 4,734 |   |
| Total expenses                                                                                         |   |              | 163,015 |   |   |   | 170,457 |   |
|                                                                                                   |   |              |    |   |   |   |   |   |
| Operating income                                                                                       |   |              | 30,930  |   |   |   | 29,239 |   |
|                                                                                                   |   |              |    |   |   |   |   |   |
| Other income and expenses                                                                              |   |              |    |   |   |   |   |   |
| Interest and other income                                                                              |   |              | 1,105   |   |   |   | 1,283 |   |
| Equity in earnings of unconsolidated joint ventures                                                    |   |              | 253     |   |   |   | 475 |   |
| Gain on involuntary conversion                                                                         |   |              | 40      |   |   |   | 742 |   |
| Gain on sale of real estate                                                                            |   |              | -       |   |   |   | 470 |   |
| Interest expense                                                                                       |   |              | (41,051 | ) |   |   | (41,450 | ) |
|                                                                                                   |   |              |    |   |   |   |   |   |
| Loss from continuing operations                                                                        |   |              | (8,723  | ) |   |   | (9,241 | ) |
| Discontinued operations:                                                                               |   |              |    |   |   |   |   |   |
|     Income from discontinued operations                                            |   |              | 194     |   |   |   | 309 |   |
|     Gain on sale of real estate from discontinued operations                       |   |              | 8,518   |   |   |   | - |   |
| Total discontinued operations                                                                          |   |              | 8,712   |   |   |   | 309 |   |
|                                                                                                   |   |              |    |   |   |   |   |   |
| Net loss                                                                                               |   |              | (11     | ) |   |   | (8,932 | ) |
| Net loss attributable to noncontrolling interest – real estate partnerships                      |   |              | 7,581   |   |   |   | 7,508 |   |
|                                                                                                   |   |              |    |   |   |   |   |   |
| Net income (loss) for Parkway Properties, Inc.                                                         |   |              | 7,570   |   |   |   | (1,424 | ) |
| Dividends on preferred stock                                                                           |   |              | (4,137  | ) |   |   | (3,600 | ) |
| Net income (loss) attributable to common stockholders                                                  |   | $                 | 3,433   |   |   | $ | (5,024 | ) |
|                                                                                                   |   |              |    |   |   |   |   |   |
| Net loss per common share attributable to Parkway Properties, Inc.:                                    |   |              |    |   |   |   |   |   |
| Basic:                                                                                                 |   |              |    |   |   |   |   |   |
|      Loss from continuing operations attributable to Parkway Properties, Inc. |   | $                 | (0.25   | ) |   | $ | (0.29 | ) |
|      Income from discontinued operations                                      |   |              | 0.41    |   |   |   | 0.02 |   |
|      Basic net income (loss) attributable to Parkway Properties, Inc.         |   | $                 | 0.16    |   |   | $ | (0.27 | ) |
| Diluted:                                                                                               |   |              |    |   |   |   |   |   |
|      Loss from continuing operations attributable to Parkway Properties, Inc. |   | $                 | (0.25   | ) |   | $ | (0.29 | ) |
|      Income from discontinued operations                                      |   |              | 0.41    |   |   |   | 0.02 |   |
|      Diluted net income (loss) attributable to Parkway Properties, Inc.       |   | $                 | 0.16    |   |   | $ | (0.27 | ) |
|                                                                                                   |   |              |    |   |   |   |   |   |
| Weighted average shares outstanding:                                                                   |   |              |    |   |   |   |   |   |
| Basic                                                                                                  |   |              | 21,413  |   |   |   | 18,627 |   |
| Diluted                                                                                                |   |              | 21,413  |   |   |   | 18,627 |   |

----

|                                                               |   | Parkway Properties, Inc. Stockholders |    |   |   |   |   |       |   |
|--------------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------|--------|--------|------------|--------|
|                                                               |   |                                  |    |   |   |   |   |       |   |   |   |   |   | Accumulated |   |   |   |   |   | Noncontrolling |   |   |   |   |
|                                                               |   |                                  |    |   |   |   |   | Common     |   |   | Additional |   |   | Other |   |   |   |   |   | Interest – |   |   |   |   |
|                                                               |   | Preferred                             |    |   | Common |   |   | Stock Held |   |   | Paid-In |   |   | Comprehensive |   |   | Accumulated |   |   | Real Estate |   |   | Total |   |
|                                                               |   | Stock                                 |    |   | Stock  |   |   | in Trust   |   |   | Capital |   |   | Loss |   |   | Deficit |   |   | Partnerships |   |   | Equity |   |
| Balance at December 31, 2009                                       |   | $                                     | 57,976  |   |   | $      | 22     |       |   | $ | (2,399 | ) |   | $ | 515,398 |   |   | $ | (4,892 | ) |   | $ | (111,960 | ) |   | $ | 116,687 |   |   | $ | 570,832 |   |
| Comprehensive income (loss)                                        |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                  |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 7,570 |   |   |   | (7,581 | ) |   |   | (11 | ) |
| Change in fair value of interest                                   |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| rate swaps                                                         |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | 435 |   |   |   | - |   |   |   | - |   |   |   | 435 |   |
| Total comprehensive income                                         |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 424 |   |
| Common dividends declared -                                        |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.225 per share                                                   |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,850 | ) |   |   | - |   |   |   | (4,850 | ) |
| Preferred dividends declared -                                     |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $1.50 per share                                                    |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,137 | ) |   |   | - |   |   |   | (4,137 | ) |
| Share-based compensation                                           |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | 877 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 877 |   |
| Issuance of 1,974,896 or 8.0% Series D Preferred Stock             |   |                                  | 44,897  |   |   |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 44,897 |   |
| 15,214 shares issued in lieu of Directors’ fees              |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | 285 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 285 |   |
| Issuance costs for shelf registration                              |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | (14 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (14 | ) |
| Purchase of Company stock – 42,618 shares                    |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| withheld to satisfy tax withholding                                |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligations in connection with vesting                             |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of restricted stock                                                |   |                                  | -       |   |   |   | -      |       |   |   | - |   |   |   | (799 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (799 | ) |
| Distribution of 17,125 shares of common                            |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock, deferred compensation plan                                  |   |                                  | -       |   |   |   | -      |       |   |   | 578 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 578 |   |
| Contribution of 4,004 shares of common                             |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock, deferred compensation plan                                  |   |                                  | -       |   |   |   | -      |       |   |   | (75 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (75 | ) |
| Purchase of noncontrolling interest in                             |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Parkway Moore, LLC |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (178 | ) |   |   | 178 |   |   |   | - |   |
|                                                               |   |                                  |    |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at September 30, 2010                                      |   | $                                     | 102,873 |   |   | $      | 22     |       |   | $ | (1,896 | ) |   | $ | 515,747 |   |   | $ | (4,457 | ) |   | $ | (113,555 | ) |   | $ | 109,284 |   |   | $ | 608,018 |   |

----

|                                                                        |   | Nine Months Ended |     |
|-----------------------------------------------------------------------------|--------|-------------------|----------|
|                                                                        |   | September 30      |     |
|                                                                        |   | 2010              |     |   | 2009 |   |
|                                                                        |   | (Unaudited)       |     |
| Operating activities                                                        |   |              |     |   |   |   |
| Net loss                                                                    |   | $                 | (11      | ) |   | $ | (8,932 | ) |
| Adjustments to reconcile net loss to cash provided by operating activities: |   |              |     |   |   |   |   |   |
| Depreciation and amortization                                               |   |              | 65,257   |   |   |   | 68,246 |   |
| Depreciation and amortization – discontinued operations               |   |              | 121      |   |   |   | 455 |   |
| Amortization of below market leases                                         |   |              | (147     | ) |   |   | (98 | ) |
| Amortization of loan costs                                                  |   |              | 1,317    |   |   |   | 1,772 |   |
| Amortization of mortgage loan discount                                      |   |              | (522     | ) |   |   | (447 | ) |
| Share-based compensation expense                                            |   |              | 877      |   |   |   | 1,940 |   |
| Operating distributions from unconsolidated joint ventures                  |   |              | -        |   |   |   | 392 |   |
| Net gain on real estate and involuntary conversion                          |   |              | (8,558   | ) |   |   | (1,212 | ) |
| Equity in earnings of unconsolidated joint ventures                         |   |              | (253     | ) |   |   | (475 | ) |
| Increase in deferred leasing costs                                          |   |              | (7,543   | ) |   |   | (7,413 | ) |
| Changes in operating assets and liabilities:                                |   |              |     |   |   |   |   |   |
| Change in receivables and other assets                                      |   |              | (8,129   | ) |   |   | 2,680 |   |
| Change in accounts payable and other liabilities                            |   |              | 10,750   |   |   |   | 6,640 |   |
|                                                                        |   |              |     |   |   |   |   |   |
| Cash provided by operating activities                                       |   |              | 53,159   |   |   |   | 63,548 |   |
|                                                                        |   |              |     |   |   |   |   |   |
| Investing activities                                                        |   |              |     |   |   |   |   |   |
| (Investment in) reimbursements from real estate related investments         |   |              | (32,174  | ) |   |   | 822 |   |
| Proceeds from sale of real estate                                           |   |              | 4,758    |   |   |   | 15,542 |   |
| Proceeds from property insurance settlement                                 |   |              | -        |   |   |   | 1,855 |   |
| Real estate development                                                     |   |              | -        |   |   |   | (4,937 | ) |
| Improvements to real estate related investments                             |   |              | (23,407  | ) |   |   | (18,950 | ) |
|                                                                        |   |              |     |   |   |   |   |   |
| Cash used in investing activities                                           |   |              | (50,823  | ) |   |   | (5,668 | ) |
|                                                                        |   |              |     |   |   |   |   |   |
| Financing activities                                                        |   |              |     |   |   |   |   |   |
| Principal payments on mortgage notes payable                                |   |              | (98,582  | ) |   |   | (31,849 | ) |
| Proceeds from long-term financing                                           |   |              | 70,000   |   |   |   | 18,500 |   |
| Proceeds from bank borrowings                                               |   |              | 100,969  |   |   |   | 35,742 |   |
| Payments on bank borrowings                                                 |   |              | (100,969 | ) |   |   | (121,682 | ) |
| Debt financing costs                                                        |   |              | (1,000   | ) |   |   | (310 | ) |
| Purchase of Company stock                                                   |   |              | (799     | ) |   |   | (42 | ) |
| Dividends paid on common stock                                              |   |              | (4,836   | ) |   |   | (18,836 | ) |
| Dividends paid on preferred stock                                           |   |              | (3,600   | ) |   |   | (3,600 | ) |
| Contributions from noncontrolling interest partners                         |   |              | -        |   |   |   | 57 |   |
| Proceeds from stock offering                                                |   |              | 44,883   |   |   |   | 84,457 |   |
|                                                                        |   |              |     |   |   |   |   |   |
| Cash provided by (used in) financing activities                             |   |              | 6,066    |   |   |   | (37,563 | ) |
|                                                                        |   |              |     |   |   |   |   |   |
| Change in cash and cash equivalents                                         |   |              | 8,402    |   |   |   | 20,317 |   |
|                                                                        |   |              |     |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                            |   |              | 20,697   |   |   |   | 15,318 |   |
|                                                                        |   |              |     |   |   |   |   |   |
| Cash and cash equivalents at end of period                                  |   | $                 | 29,099   |   |   | $ | 35,635 |   |

----

----

|                                                                                                                |   | Three Months Ended September 30 |   |   | Nine Months Ended September 30 |   |
|---------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
|                                                                                                                |   | 2010                            |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Numerator:                                                                                                          |   |                            |   |   |                           |   |   |   |   |   |   |   |
| Basic and diluted net income (loss)                                                                                 |   |                            |   |   |                           |   |   |   |   |   |   |   |
| attributable to common stockholders                                                                                 |   | $                               | (3,569 | )      |                           | $      | (2,755 | ) |   | $ | 3,433 |   |   | $ | (5,024 | ) |
|                                                                                                                |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                                                        |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Basic weighted average shares                                                                                       |   |                            | 21,438 |   |                           |   | 21,313 |   |   |   | 21,413 |   |   |   | 18,627 |   |
| Dilutive weighted average shares                                                                                    |   |                            | 21,438 |   |                           |   | 21,313 |   |   |   | 21,413 |   |   |   | 18,627 |   |
|         Diluted income (loss) per share attributable to Parkway Properties, Inc. |   | $                               | (0.17  | )      |                           | $      | (0.13 | ) |   | $ | 0.16 |   |   | $ | (0.27 | ) |

----

|                                                                |   | Nine Months Ended |   |
|---------------------------------------------------------------------|--------|-------------------|--------|
|                                                                |   | September 30      |   |
|                                                                |   | 2010              |   |   | 2009 |   |
|                                                                |   | (in thousands)    |   |
| Supplemental cash flow information:                                 |   |              |   |   |   |   |
| Cash paid for interest                                              |   | $                 | 40,075 |   |   | $ | 40,437 |   |
| Supplemental schedule of non-cash investing and financing activity: |   |              |   |   |   |   |   |   |
| Mortgage note payable transferred to purchaser                      |   |              | (8,666 | ) |   |   | - |   |
| Mortgage loan issued to purchaser                                   |   |              | (1,500 | ) |   |   | - |   |
| Restricted shares and deferred incentive share units issued         |   |              | 1,898  |   |   |   | 3,039 |   |
| Shares issued in lieu of Directors’ fees                      |   |              | 285    |   |   |   | 42 |   |

----

| Office Property |   | Location       |   | SquareFeet |   | Date ofSale |     | Net SalesPrice |   |   | Net BookValue ofReal Estate |   |   | Gain onSale |   |
|-----------------|--------|----------------|--------|------------|--------|-------------|----------|----------------|--------|--------|-----------------------------|--------|--------|-------------|--------|
| One Park Ten    |   | Houston, Texas |   |       | 163    |        | 04/15/10 |           | $      | 14,924 |                        |   | $      | 6,406       |   |   | $ | 8,518 |   |

|                                                     |   | Three MonthsEndedSeptember 30 |   |   | Nine MonthsEndedSeptember 30 |   |
|----------------------------------------------------------|--------|-------------------------------|--------|--------|------------------------------|--------|
|                                                     |   | 2010                          |   |   | 2009                         |   |   | 2010 |   |   | 2009 |   |
| Income Statement:Revenues                                |   |                          |   |   |                         |   |   |   |   |   |   |   |
| Income from office and parking properties                |   | $                             | 1      |   |                         | $      | 857 |   |   | $ | 994 |   |   | $ | 2,541 |   |
|                                                     |   |                          | 1      |   |                         |   | 857 |   |   |   | 994 |   |   |   | 2,541 |   |
| Expenses                                                 |   |                          |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Office and parking properties:                           |   |                          |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Property operating expense                               |   |                          | (5     | )      |                         |   | 428 |   |   |   | 362 |   |   |   | 1,291 |   |
| Interest expense                                         |   |                          | -      |   |                         |   | 163 |   |   |   | 317 |   |   |   | 486 |   |
| Depreciation and amortization                            |   |                          | -      |   |                         |   | 161 |   |   |   | 121 |   |   |   | 455 |   |
|                                                     |   |                          | (5     | )      |                         |   | 752 |   |   |   | 800 |   |   |   | 2,232 |   |
| Income from discontinued operations                      |   |                          | 6      |   |                         |   | 105 |   |   |   | 194 |   |   |   | 309 |   |
| Gain on sale of real estate from discontinued operations |   |                          | -      |   |                         |   | - |   |   |   | 8,518 |   |   |   | - |   |
| Total discontinued operations                            |   | $                             | 6      |   |                         | $      | 105 |   |   | $ | 8,712 |   |   | $ | 309 |   |

----

|                                                  |   |                    |   |            |   | Parkway’s |   |       |
|-------------------------------------------------------|--------|-------------------------|--------|-----------------|--------|-----------------|--------|------------|
|                                                  |   |                    |   |            |   | Ownership       | Square | Percentage |
| Joint Venture Entity                                  |   | Property Name           |   | Location        |   | Interest        | Feet   | Leased     |
| Wink-Parkway Partnership                              |   | Wink Building           |   | New Orleans, LA |   | 50.0%           | 32     | 7.6%       |
| Parkway Joint Venture, LLC (“Jackson JV”) |   | UBS Building/River Oaks |   | Jackson, MS     |   | 20.0%           | 167    | 90.4%      |
| RubiconPark I, LLC (“Rubicon JV”) (1)     |   | Lakewood/Falls Pointe/  |   | Atlanta, GA     |   |            |   |       |
|                                                  |   | Carmel Crossing         |   | Charlotte, NC   |   | 20.0%           | 561    | 75.7%      |
| RubiconPark II, LLC (“Maitland JV”)       |   | Maitland 200            |   | Orlando, FL     |   | 20.0%           | 204    | 100.0%     |
|                                                  |   |                    |   |            |   |            | 964    | 81.1%      |

|                                          |   |         |   |          |   |     |     | Parkway’s |   |   | Monthly |   |   | Loan    |   |   | Loan     |   |
|-----------------------------------------------|--------|--------------|--------|---------------|--------|----------|----------|-----------------|--------|--------|---------|--------|--------|---------|--------|--------|----------|--------|
|                                          |   | Type of      |   |          |   |     |     | Share           |   |   | Debt    |   |   | Balance |   |   | Balance  |   |
| Description                                   |   | Debt Service |   | Interest Rate |   | Maturity |     | of Debt         |   |   | Service |   |   | 9/30/10 |   |   | 12/31/09 |   |
| Maitland JV                                   |   | Amortizing   |   |          | 4.390  | %        | 06/01/11 |            |   | 0.00   | %       |   | $      | -       |   |   | $        | -      |   |   | $ | - |   |
| Rubicon JV (1)                                |   | Amortizing   |   |          | 4.865  | %        | 01/01/12 |            |   | 13.85  | %       |   |   | -       |   |   |     | -      |   |   |   | - |   |
| Jackson JV                                    |   | Amortizing   |   |          | 5.840  | %        | 07/01/15 |            |   | 20.00  | %       |   |   | 12      |   |   |     | 2,483  |   |   |   | 2,507 |   |
|                                          |   |         |   |          |   |     |     |            |   |   |    |   | $      | 12      |   |   | $        | 2,483  |   |   | $ | 2,507 |   |
| Weighted Average Interest Rate at End of Year |   |         |   |          |   |     |     | 5.840           | %      |   |    | 5.840  | %      |

----

|                                     |   |        |   |   |          |   |   |      |   |   |   |   |
|------------------------------------------|--------|-------------|--------|--------|---------------|--------|--------|-----------|--------|--------|--------|--------|
| Schedule of Mortgage Maturities by Year: |   | Maitland JV |   |   | RubiconJV (1) |   |   | JacksonJV |   |   | Total  |   |
| 2010  (remaining 3 months)     |   | $           | -      |   |          | $      | -      |      |   | $      | 8      |   |   | $ | 8 |   |
| 2011                                     |   |        | -      |   |          |   | -      |      |   |   | 35     |   |   |   | 35 |   |
| 2012                                     |   |        | -      |   |          |   | -      |      |   |   | 37     |   |   |   | 37 |   |
| 2013                                     |   |        | -      |   |          |   | -      |      |   |   | 39     |   |   |   | 39 |   |
| 2014                                     |   |        | -      |   |          |   | -      |      |   |   | 41     |   |   |   | 41 |   |
| 2015                                     |   |        | -      |   |          |   | -      |      |   |   | 2,323  |   |   |   | 2,323 |   |
|                                     |   | $           | -      |   |          | $      | -      |      |   | $      | 2,483  |   |   | $ | 2,483 |   |

| (1)   |  During the fourth quarter of 2009, Parkway recognized a full impairment loss on its investment in the Rubicon JV.  Therefore, the Company has excluded its share of debt in the Rubicon JV of $7.1 million at September 30, 2010 and December 31, 2009 in the schedule above.  During the third quarter of 2010, the Company purchased the first mortgage loan associated with this joint venture for a net purchase price of $33.0 million.  During October 2010, the Company, as holder of the mortgage, foreclosed on the three properties, which served as collateral for the associated loan.  On October 29, 2010, the Company sold the two Atlanta properties to Texas Fund II and is under contract to sell the Charlotte property to Texas Fund II during November 2010. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                          |   |             |   | Parkway’s   |   | Square Feet    |
|-----------------------------------------------|--------|------------------|--------|-------------------|--------|----------------|
| Joint Venture Entity and Property Name        |   | Location         |   |  Ownership % |   | (In thousands) |
| Parkway Properties Office Fund, LP            |   |             |   |              |   |           |
| Desert Ridge Corporate Center                 |   | Phoenix, AZ      |   | 26.500%           |   | 293            |
| Maitland 100                                  |   | Orlando, FL      |   | 25.000%           |   | 128            |
| 555 Winderley                                 |   | Orlando, FL      |   | 25.000%           |   | 102            |
| Gateway Center                                |   | Orlando, FL      |   | 25.000%           |   | 228            |
| BellSouth Building                            |   | Jacksonville, FL |   | 25.000%           |   | 92             |
| Centurion Centre                              |   | Jacksonville, FL |   | 25.000%           |   | 88             |
| 100 Ashford Center                            |   | Atlanta, GA      |   | 25.000%           |   | 160            |
| Peachtree Ridge                               |   | Atlanta, GA      |   | 25.000%           |   | 161            |
| Overlook II                                   |   | Atlanta, GA      |   | 25.000%           |   | 260            |
| U.S. Cellular Plaza (formerly Citicorp Plaza) |   | Chicago, IL      |   | 40.000%           |   | 607            |
| Chatham Centre                                |   | Schaumburg, IL   |   | 25.000%           |   | 206            |
| Renaissance Center                            |   | Memphis, TN      |   | 25.000%           |   | 190            |
| 1401 Enclave Parkway                          |   | Houston, TX      |   | 25.000%           |   | 209            |
| Total Parkway Properties Office Fund, LP      |   |             |   |              |   | 2,724          |
| Parkway Properties Office Fund II, LP         |   | -                |   | -                 |   | -              |
| Total Consolidated Joint Ventures             |   |             |   |              |   | 2,724          |

----

----

|                 | Threshold     | Target        | Maximum       |
|----------------------|---------------|---------------|---------------|
| Absolute Return Goal | 10%           | 12%           | 14%           |
| Relative Return Goal | RMS + 100 bps | RMS + 200 bps | RMS + 300 bps |

|                |          |   | Weighted   |        |        |         | Weighted    |
|---------------------|---------------|--------|------------|-------------|-------------|--------------|-------------|
|                |          |   | Average    |        | Deferred    |         | Average     |
|                | Restricted    |   | Grant-Date |        | Incentive   |         | Grant-Date  |
|                | Shares        |   | Fair Value |        | Share Units |         | Fair Value  |
| Balance at 12/31/09 | 308,975  |   |  $    | 29.94  |        | 18,055  |        |  $ | 34.08  |
| Issued              | 345,120  |   | 7.30       |        | -      |         | -      |
| Vested              | (152,941)     |   | 33.06      |        | -      |         | -      |
| Forfeited           | (21,224)      |   | 26.69      |        | (1,475)     |         | 37.73  |
| Balance at 09/30/10 | 479,930  |   |  $    | 12.81  |        | 16,580  |        |  $ | 33.75  |

----

----

----

----

|                                                                                                                |   | At or for the three months ended |    |   | At or for the three months ended |   |
|---------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|----------------------------------|--------|
|                                                                                                                |   | September 30, 2010               |    |   | September 30, 2009               |   |
|                                                                                                                |   | Office                           |    |   | Unallocated                      |   |   |   |   |   | Office |   |   | Unallocated |   |   |   |   |
|                                                                                                                |   | Properties                       |    |   | and Other                        |   |   | Consolidated |   |   | Properties |   |   | and Other |   |   | Consolidated |   |
|                                                                                                                |   |                             |    |   | (in thousands)                   |   |   |   |   |   |   |   |   | (in thousands) |   |   |   |   |
| Income from office and parking properties (a)                                                                       |   | $                                | 61,567  |   |                             | $      | - |   |   | $ | 61,567 |   |   | $ | 65,617 |   |   | $ | - |   |   | $ | 65,617 |   |
| Management company income                                                                                           |   |                             | -       |   |                             |   | 585 |   |   |   | 585 |   |   |   | - |   |   |   | 340 |   |   |   | 340 |   |
| Property operating expenses (b)                                                                                     |   |                             | (29,332 | )      |                             |   | - |   |   |   | (29,332 | ) |   |   | (31,172 | ) |   |   | - |   |   |   | (31,172 | ) |
| Depreciation and amortization                                                                                       |   |                             | (21,126 | )      |                             |   | - |   |   |   | (21,126 | ) |   |   | (23,240 | ) |   |   | - |   |   |   | (23,240 | ) |
| Management company expenses                                                                                         |   |                             | -       |   |                             |   | (858 | ) |   |   | (858 | ) |   |   | - |   |   |   | (577 | ) |   |   | (577 | ) |
| General and administrative expenses                                                                                 |   |                             | -       |   |                             |   | (1,817 | ) |   |   | (1,817 | ) |   |   | - |   |   |   | (1,783 | ) |   |   | (1,783 | ) |
| Other income                                                                                                        |   |                             | -       |   |                             |   | 355 |   |   |   | 355 |   |   |   | - |   |   |   | 672 |   |   |   | 672 |   |
| Equity in earnings of unconsolidated joint ventures                                                                 |   |                             | 61      |   |                             |   | - |   |   |   | 61 |   |   |   | 48 |   |   |   | - |   |   |   | 48 |   |
| Gain on involuntary conversion                                                                                      |   |                             | 40      |   |                             |   | - |   |   |   | 40 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Interest expense (c)                                                                                                |   |                             | (12,178 | )      |                             |   | (1,491 | ) |   |   | (13,669 | ) |   |   | (12,142 | ) |   |   | (1,530 | ) |   |   | (13,672 | ) |
| Adjustment for noncontrollinginterest-real estate                                                                   |   |                             |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| partnerships                                                                                                        |   |                             | 2,356   |   |                             |   | - |   |   |   | 2,356 |   |   |   | 2,107 |   |   |   | - |   |   |   | 2,107 |   |
| Income from discontinuedoperations                                                                                  |   |                             | 6       |   |                             |   | - |   |   |   | 6 |   |   |   | 105 |   |   |   | - |   |   |   | 105 |   |
| Dividends on preferred stock                                                                                        |   |                             | -       |   |                             |   | (1,737 | ) |   |   | (1,737 | ) |   |   | - |   |   |   | (1,200 | ) |   |   | (1,200 | ) |
| Net income (loss) attributable tocommon stockholders                                                                |   |                             | 1,394   |   |                             |   | (4,963 | ) |   |   | (3,569 | ) |   |   | 1,323 |   |   |   | (4,078 | ) |   |   | (2,755 | ) |
|                                                                                                                |   |                             |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                                       |   |                             | 21,126  |   |                             |   | - |   |   |   | 21,126 |   |   |   | 23,240 |   |   |   | - |   |   |   | 23,240 |   |
| Depreciation and amortization                                                                                       |   |                             |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -discontinued operations                                                                                            |   |                             | -       |   |                             |   | - |   |   |   | - |   |   |   | 161 |   |   |   | - |   |   |   | 161 |   |
| Depreciation and amortization                                                                                       |   |                             |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -noncontrolling interest - real                                                                                     |   |                             |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| estate partnerships                                                                                                 |   |                             | (4,011  | )      |                             |   | - |   |   |   | (4,011 | ) |   |   | (4,625 | ) |   |   | - |   |   |   | (4,625 | ) |
| Adjustment for depreciation and amortization-unconsolidated       joint ventures |   |                             | 85      |   |                             |   | - |   |   |   | 85 |   |   |   | 221 |   |   |   | - |   |   |   | 221 |   |
| Funds from operations attributableto common stockholders                                                            |   | $                                | 18,594  |   |                             | $      | (4,963 | ) |   | $ | 13,631 |   |   | $ | 20,320 |   |   | $ | (4,078 | ) |   | $ | 16,242 |   |
|                                                                                                                |   |                             |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures (d)                                                                                            |   | $                                | 12,629  |   |                             | $      | - |   |   | $ | 12,629 |   |   | $ | 9,685 |   |   | $ | - |   |   | $ | 9,685 |   |

| (a) | Included in property operating revenues are rental revenues, customer reimbursements, parking income and other income. |
|-----|------------------------------------------------------------------------------------------------------------------------|

| (b) | Included in property operating expenses are real estate taxes, insurance, contract services, repairs and maintenance and other property operating expenses. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | Interest expense for office properties represents interest expense on property secured mortgage debt.  It does not include interest expense on the Company’s unsecured line of credit, which is included in “Unallocated and Other”. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | Capital expenditures include building improvements, tenant improvements and deferred leasing costs. |
|-----|-----------------------------------------------------------------------------------------------------|

----

|                                                                       |   | At or for the nine months ended |      |   | At or for the nine months ended |   |
|----------------------------------------------------------------------------|--------|---------------------------------|-----------|--------|---------------------------------|--------|
|                                                                       |   | September 30, 2010              |      |   | September 30, 2009              |   |
|                                                                       |   | Office                          |      |   | Unallocated                     |   |   |   |   |   | Office |   |   | Unallocated |   |   |   |   |
|                                                                       |   | Properties                      |      |   | and Other                       |   |   | Consolidated |   |   | Properties |   |   | and Other |   |   | Consolidated |   |
|                                                                       |   |                            |      |   | (in thousands)                  |   |   |   |   |   |   |   |   | (in thousands) |   |   |   |   |
| Income from office and parking properties (a)                              |   | $                               | 192,614   |   |                            | $      | - |   |   | $ | 192,614 |   |   | $ | 198,210 |   |   | $ | - |   |   | $ | 198,210 |   |
| Management company income                                                  |   |                            | -         |   |                            |   | 1,331 |   |   |   | 1,331 |   |   |   | - |   |   |   | 1,486 |   |   |   | 1,486 |   |
| Property operating expenses (b)                                            |   |                            | (89,978   | )      |                            |   | - |   |   |   | (89,978 | ) |   |   | (95,767 | ) |   |   | - |   |   |   | (95,767 | ) |
| Depreciation and amortization                                              |   |                            | (65,257   | )      |                            |   | - |   |   |   | (65,257 | ) |   |   | (68,246 | ) |   |   | - |   |   |   | (68,246 | ) |
| Management company expenses                                                |   |                            | -         |   |                            |   | (2,243 | ) |   |   | (2,243 | ) |   |   | - |   |   |   | (1,710 | ) |   |   | (1,710 | ) |
| General and administrative expenses                                        |   |                            | -         |   |                            |   | (5,537 | ) |   |   | (5,537 | ) |   |   | - |   |   |   | (4,734 | ) |   |   | (4,734 | ) |
| Other income                                                               |   |                            | -         |   |                            |   | 1,105 |   |   |   | 1,105 |   |   |   | - |   |   |   | 1,283 |   |   |   | 1,283 |   |
| Equity in earnings of unconsolidated joint ventures                        |   |                            | 253       |   |                            |   | - |   |   |   | 253 |   |   |   | 475 |   |   |   | - |   |   |   | 475 |   |
| Gain on involuntary conversion                                             |   |                            | 40        |   |                            |   | - |   |   |   | 40 |   |   |   | 742 |   |   |   | - |   |   |   | 742 |   |
| Gain on sale or real estate                                                |   |                            | -         |   |                            |   | - |   |   |   | - |   |   |   | 470 |   |   |   | - |   |   |   | 470 |   |
| Interest expense (c)                                                       |   |                            | (36,476   | )      |                            |   | (4,575 | ) |   |   | (41,051 | ) |   |   | (36,383 | ) |   |   | (5,067 | ) |   |   | (41,450 | ) |
| Adjustment for noncontrolling interest -real estate partnerships           |   |                            | 7,581     |   |                            |   | - |   |   |   | 7,581 |   |   |   | 7,508 |   |   |   | - |   |   |   | 7,508 |   |
| Income from discontinued operations                                        |   |                            | 194       |   |                            |   | - |   |   |   | 194 |   |   |   | 309 |   |   |   | - |   |   |   | 309 |   |
| Gain on sale of real estate from discontinuing operations                  |   |                            | 8,518     |   |                            |   | - |   |   |   | 8,518 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Dividends on preferred stock                                               |   |                            | -         |   |                            |   | (4,137 | ) |   |   | (4,137 | ) |   |   | - |   |   |   | (3,600 | ) |   |   | (3,600 | ) |
| Net income (loss) attributable to common stockholders                      |   |                            | 17,489    |   |                            |   | (14,056 | ) |   |   | 3,433 |   |   |   | 7,318 |   |   |   | (12,342 | ) |   |   | (5,024 | ) |
|                                                                       |   |                            |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                              |   |                            | 65,257    |   |                            |   | - |   |   |   | 65,257 |   |   |   | 68,246 |   |   |   | - |   |   |   | 68,246 |   |
| Depreciation and amortization                                              |   |                            |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -discontinued operations                                                   |   |                            | 121       |   |                            |   | - |   |   |   | 121 |   |   |   | 455 |   |   |   | - |   |   |   | 455 |   |
| Depreciation and amortization                                              |   |                            |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -noncontrolling interest - real                                            |   |                            |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| estate partnerships                                                        |   |                            | (12,837   | )      |                            |   | - |   |   |   | (12,837 | ) |   |   | (14,939 | ) |   |   | - |   |   |   | (14,939 | ) |
| Adjustment for depreciation and amortization-unconsolidated joint ventures |   |                            | 253       |   |                            |   | - |   |   |   | 253 |   |   |   | 630 |   |   |   | - |   |   |   | 630 |   |
| Gain on sale of real estate                                                |   |                            | (8,518    | )      |                            |   | - |   |   |   | (8,518 | ) |   |   | (470 | ) |   |   | - |   |   |   | (470 | ) |
| Funds from operations attributable to common stockholders                  |   | $                               | 61,765    |   |                            | $      | (14,056 | ) |   | $ | 47,709 |   |   | $ | 61,240 |   |   | $ | (12,342 | ) |   | $ | 48,898 |   |
|                                                                       |   |                            |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                                                               |   | $                               | 1,601,498 |   |                            | $      | 19,567 |   |   | $ | 1,621,065 |   |   | $ | 1,617,643 |   |   | $ | 26,186 |   |   | $ | 1,643,829 |   |
|                                                                       |   |                            |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Office and parking properties                                              |   | $                               | 1,403,101 |   |                            | $      | - |   |   | $ | 1,403,101 |   |   | $ | 1,409,342 |   |   | $ | - |   |   | $ | 1,409,342 |   |
|                                                                       |   |                            |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment in unconsolidated joint ventures                                |   | $                               | 2,805     |   |                            | $      | - |   |   | $ | 2,805 |   |   | $ | 11,332 |   |   | $ | - |   |   | $ | 11,332 |   |
|                                                                       |   |                            |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures (d)                                                   |   | $                               | 30,950    |   |                            | $      | - |   |   | $ | 30,950 |   |   | $ | 26,363 |   |   | $ | - |   |   | $ | 26,363 |   |

| (a)   | Included in income from office and parking properties are rental revenues, customer reimbursements, parking income and other income. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | Included in property operating expenses are real estate taxes, insurance, contract services, repairs and maintenance and property operating expenses. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | Interest expense for office properties represents interest expense on property secured mortgage debt.  It does not include interest expense on the Company’s unsecured line of credit which is included in “Unallocated and Other”. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d)   | Capital expenditures include building improvements, tenant improvements and deferred leasing costs. |
|-----------------|-----------------------------------------------------------------------------------------------------|

----

----

| ·   | Fund and Fund-Like Investments.  The Company believes that fund and fund-like investments have the highest priority of the Company’s capital allocation, because it gives Parkway’s stockholders the highest risk adjusted return as measured by internal rate of return, capitalization rate and accretion per share. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Operator-Owner.  The Company plans to make a full transformation to an operator-owner, with the goal of being a majority operator/owner by the end of the Plan.  This has been a goal for several years and will continue to be a core strategy as Parkway seeks to increase fee income and maximize its return on equity and accretion per share.  Additionally, the Company will continue to expand PRS, which offers expert real estate management guidance, professional property management services and strategic marketing and leasing services aimed at increasing net operating income and maximizing profit upon exit. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Capital Allocation Discipline.  The Company’s overall capital structure goal is to achieve a debt to gross asset value ratio of 50%, as determined by using a 10-year historical capitalization rate of approximately 8.5%, and a net debt to EBITDA multiple of 6.5 times or less.  Beyond the balance sheet, capital allocation refers to the Company’s goal to exit non-strategic markets through the continuation of its Asset Recycling program.  Most of the properties identified for sale are smaller assets or assets located in smaller markets where Parkway does not have a significant presence.  By the end of the FOCUS plan, the Company’s goal is to be invested in larger, higher-quality properties located in higher-rent growth markets through fund and fund-like investments.  The Company will continue to maintain discipline as it relates to managing the balance sheet and the acquisition and disposition of assets. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Uncompromising Focus on Operations.  Parkway believes that its uncompromising focus on operations is what sets it apart from other office property owners.  An important goal of the FOCUS Plan is to move decision-making authority to the regional office level.  The Company’s market leaders already have the responsibility of setting rents, increasing net operating income margins and maintaining a consistent standard of operations and will be given more profit and loss responsibility and investment authority going forward.  It is important that we know our markets, which is best achieved when Parkway’s people live and work within the market.  An integral part of the FOCUS Plan is a program referred to as “We Know…City.”  These three words imply that Parkway employees know more than just how to manage real estate, but that they have a deep understanding of a city’s history, economics, infrastructure, politics and much more.  By truly knowing the cities where the Company is invested, we are better positioned for leasing, active asset management, recruitment and investments. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Shareholder Returns.  All of the previously mentioned goals funnel to the ultimate goal of the FOCUS Plan, which is to maximize total return to Parkway’s shareholders.  The Company has set a goal of achieving a 12% compounded annual total return to its shareholders for the three-year period starting July 1, 2010. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|                                                                     |   | Nine Months Ended |     |
|--------------------------------------------------------------------------|--------|-------------------|----------|
|                                                                     |   | September 30      |     |
|                                                                     |   | 2010              |     |   | 2009 |   |
|                                                                     |   | (Unaudited)       |     |
| Net income (loss)                                                        |   | $                 | 7,570    |   |   | $ | (1,424 | ) |
| Adjustments to net income (loss):                                        |   |              |     |   |   |   |   |   |
| Interest expense                                                         |   |              | 39,862   |   |   |   | 40,164 |   |
| Amortization of financing costs                                          |   |              | 1,317    |   |   |   | 1,772 |   |
| Loss on early extinguishment of debt                                     |   |              | 189      |   |   |   | - |   |
| Depreciation and amortization                                            |   |              | 65,378   |   |   |   | 68,701 |   |
| Amortization of share-based compensation                                 |   |              | 877      |   |   |   | 1,940 |   |
| Net gain on real estate and involuntary conversion                       |   |              | (8,558   | ) |   |   | (1,212 | ) |
| Tax expense                                                              |   |              | 176      |   |   |   | 2 |   |
| EBITDA adjustments - unconsolidated joint ventures                       |   |              | 363      |   |   |   | 1,014 |   |
| EBITDA adjustments - noncontrolling interest in real estate partnerships |   |              | (22,036  | ) |   |   | (24,356 | ) |
| EBITDA (1)                                                               |   | $                 | 85,138   |   |   | $ | 86,601 |   |
|                                                                     |   |              |     |   |   |   |   |   |
| Interest coverage ratio:                                                 |   |              |     |   |   |   |   |   |
| EBITDA                                                                   |   | $                 | 85,138   |   |   | $ | 86,601 |   |
| Interest expense:                                                        |   |              |     |   |   |   |   |   |
| Interest expense                                                         |   | $                 | 39,862   |   |   | $ | 40,164 |   |
| Interest expense - unconsolidated joint ventures                         |   |              | 110      |   |   |   | 376 |   |
| Interest expense - noncontrolling interest in real estate partnerships   |   |              | (8,995   | ) |   |   | (9,209 | ) |
| Total interest expense                                                   |   | $                 | 30,977   |   |   | $ | 31,331 |   |
| Interest coverage ratio                                                  |   |              | 2.75     |   |   |   | 2.76 |   |
|                                                                     |   |              |     |   |   |   |   |   |
| Fixed charge coverage ratio:                                             |   |              |     |   |   |   |   |   |
| EBITDA                                                                   |   | $                 | 85,138   |   |   | $ | 86,601 |   |
| Fixed charges:                                                           |   |              |     |   |   |   |   |   |
| Interest expense                                                         |   | $                 | 30,977   |   |   | $ | 31,331 |   |
| Preferred dividends                                                      |   |              | 4,137    |   |   |   | 3,600 |   |
| Principal payments (excluding early extinguishment of debt)              |   |              | 10,794   |   |   |   | 10,083 |   |
| Principal payments - unconsolidated joint ventures                       |   |              | 24       |   |   |   | 108 |   |
| Principal payments - noncontrolling interest in real estate partnerships |   |              | (762     | ) |   |   | (695 | ) |
| Total fixed charges                                                      |   | $                 | 45,170   |   |   | $ | 44,427 |   |
| Fixed charge coverage ratio                                              |   |              | 1.88     |   |   |   | 1.95 |   |
|                                                                     |   |              |     |   |   |   |   |   |
| Modified fixed charge coverage ratio:                                    |   |              |     |   |   |   |   |   |
| EBITDA                                                                   |   | $                 | 85,138   |   |   | $ | 86,601 |   |
| Modified fixed charges:                                                  |   |              |     |   |   |   |   |   |
| Interest expense                                                         |   | $                 | 30,977   |   |   | $ | 31,331 |   |
| Preferred dividends                                                      |   |              | 4,137    |   |   |   | 3,600 |   |
| Total modified fixed charges                                             |   | $                 | 35,114   |   |   | $ | 34,931 |   |
| Modified fixed charge coverage ratio                                     |   |              | 2.42     |   |   |   | 2.48 |   |
|                                                                     |   |              |     |   |   |   |   |   |
| Net debt to EBITDA multiple:                                             |   |              |     |   |   |   |   |   |
| EBITDA - trailing 12 months                                              |   | $                 | 114,120  |   |   | $ | 114,316 |   |
| Mortgage notes payable                                                   |   | $                 | 815,452  |   |   | $ | 856,232 |   |
| Notes payable to banks                                                   |   |              | 100,000  |   |   |   | 100,000 |   |
| Adjustments for unconsolidated joint ventures                            |   |              | 2,483    |   |   |   | 9,648 |   |
| Adjustments for noncontrolling interest in real estate partnerships      |   |              | (212,130 | ) |   |   | (215,891 | ) |
| Parkway’s share of total debt                                      |   |              | 705,805  |   |   |   | 749,989 |   |
| Less:  Parkway’s share of cash                           |   |              | (20,413  | ) |   |   | (24,011 | ) |
| Parkway’s share of net debt                                        |   | $                 | 685,392  |   |   | $ | 725,978 |   |
| Net debt to EBITDA multiple                                              |   |              | 6.01     |   |   |   | 6.35 |   |

| (1)   | Parkway defines EBITDA, a non-GAAP financial measure, as net income before interest, income taxes, depreciation, amortization, losses on early extinguishment of debt and other gains and losses. EBITDA, as calculated by us, is not comparable to EBITDA reported by other REITs that do not define EBITDA exactly as we do. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                       |   | Nine Months Ended |    |
|------------------------------------------------------------|--------|-------------------|---------|
|                                                       |   | September 30      |    |
|                                                       |   | 2010              |    |   | 2009 |   |
| Cash flows provided by operating activities                |   | $                 | 53,159  |   |   | $ | 63,548 |   |
| Amortization of above (below) market leases                |   |              | 147     |   |   |   | 98 |   |
| Amortization of mortgage loan discount                     |   |              | 522     |   |   |   | 447 |   |
| Operating distributions from unconsolidated joint ventures |   |              | -       |   |   |   | (392 | ) |
| Interest expense                                           |   |              | 39,862  |   |   |   | 40,164 |   |
| Loss on early extinguishment of debt                       |   |              | 189     |   |   |   | - |   |
| Tax expense                                                |   |              | 176     |   |   |   | 2 |   |
| Change in deferred leasing costs                           |   |              | 7,543   |   |   |   | 7,413 |   |
| Change in receivables and other assets                     |   |              | 8,129   |   |   |   | (2,680 | ) |
| Change in accounts payable and other liabilities           |   |              | (10,750 | ) |   |   | (6,640 | ) |
| Adjustments for noncontrolling interests                   |   |              | (14,455 | ) |   |   | (16,848 | ) |
| Adjustments for unconsolidated joint ventures              |   |              | 616     |   |   |   | 1,489 |   |
| EBITDA                                                     |   | $                 | 85,138  |   |   | $ | 86,601 |   |

|                                                                                 |   | Increase   |   |
|--------------------------------------------------------------------------------------|--------|------------|--------|
|                                                                                 |   | (Decrease) |   |
| Net income attributable to Parkway Properties, Inc.                                  |   | $          | 7,570  |   |
| Net loss attributable to noncontrolling interests                                    |   |       | (7,581 | ) |
| Net loss                                                                             |   |       | (11    | ) |
| Change in market value of interest rate swaps                                        |   |       | 435    |   |
| Comprehensive income                                                                 |   |       | 424    |   |
| Common stock dividends declared                                                      |   |       | (4,850 | ) |
| Preferred stock dividends declared                                                   |   |       | (4,137 | ) |
| Share-based compensation                                                             |   |       | 877    |   |
| Issuance of preferred stock                                                          |   |       | 44,897 |   |
| Shares issued in lieu of Directors’ Fees                                       |   |       | 285    |   |
| Issuance costs for shelf registration                                                |   |       | (14    | ) |
| Shares withheld to satisfy tax withholding obligation on vesting of restricted stock |   |       | (799   | ) |
| Net shares distributed from deferred compensation plan                               |   |       | 503    |   |
|                                                                                 |   | $          | 37,186 |   |

----

|                                            |   | Three Months Ended September 30 |   |   | Nine Months Ended September 30 |   |
|-------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
|                                            |   |                            |   |   |                           |   |   | Increase |   |   | % |   |   |   |   |   |   |   |   | Increase |   |   | % |   |
|                                            |   | 2010                            |   |   | 2009                           |   |   | (Decrease) |   |   | Change |   |   | 2010 |   |   | 2009 |   |   | (Decrease) |   |   | Change |   |
| Revenue from office andparking properties:      |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Same-store properties                           |   | $                               | 61,563 |   |                           | $      | 65,619 |   |   | $ | (4,056 | ) |   |   | -6.2 | % |   | $ | 192,612 |   |   | $ | 197,187 |   |   | $ | (4,575 | ) |   |   | -2.3 | % |
| Properties disposed                             |   |                            | 4      |   |                           |   | (2 | ) |   |   | 6 |   |   |   | -300.0 | % |   |   | 2 |   |   |   | 1,023 |   |   |   | (1,021 | ) |   |   | -99.8 | % |
| Total revenue from officeand parking properties |   | $                               | 61,567 |   |                           | $      | 65,617 |   |   | $ | (4,050 | ) |   |   | -6.2 | % |   | $ | 192,614 |   |   | $ | 198,210 |   |   | $ | (5,596 | ) |   |   | -2.8 | % |

|                              |   | Three Months Ended September 30 |   |   | Nine Months Ended September 30 |   |
|-----------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
|                              |   |                            |   |   |                           |   |   | Increase |   |   | % |   |   |   |   |   |   |   |   | Increase |   |   | % |   |
|                              |   | 2010                            |   |   | 2009                           |   |   | (Decrease) |   |   | Change |   |   | 2010 |   |   | 2009 |   |   | (Decrease) |   |   | Change |   |
| Property operating expenses       |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Same-store properties             |   | $                               | 29,319 |   |                           | $      | 31,180 |   |   | $ | (1,861 | ) |   |   | -6.0 | % |   | $ | 90,024 |   |   | $ | 95,228 |   |   | $ | (5,204 | ) |   |   | -5.5 | % |
| Properties disposed               |   |                            | 13     |   |                           |   | (8 | ) |   |   | 21 |   |   |   | -262.5 | % |   |   | (46 | ) |   |   | 539 |   |   |   | (585 | ) |   |   | -108.5 | % |
| Total property operating expenses |   | $                               | 29,332 |   |                           | $      | 31,172 |   |   | $ | (1,840 | ) |   |   | -5.9 | % |   | $ | 89,978 |   |   | $ | 95,767 |   |   | $ | (5,789 | ) |   |   | -6.0 | % |

----

|                 | Threshold     | Target        | Maximum       |
|----------------------|---------------|---------------|---------------|
| Absolute Return Goal | 10%           | 12%           | 14%           |
| Relative Return Goal | RMS + 100 bps | RMS + 200 bps | RMS + 300 bps |

----

----

|                            |   | Three Months Ended September 30 |   |   | Nine months ended September 30 |   |
|---------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
|                            |   |                            |   |   |                           |   |   | Increase |   |   | % |   |   |   |   |   |   |   |   | Increase |   |   | % |   |
|                            |   | 2010                            |   |   | 2009                           |   |   | (Decrease) |   |   | Change |   |   | 2010 |   |   | 2009 |   |   | (Decrease) |   |   | Change |   |
| Interest expense:               |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage interest expense       |   | $                               | 11,959 |   |                           | $      | 11,877 |   |   | $ | 82 |   |   |   | 0.7 | % |   | $ | 35,746 |   |   | $ | 35,372 |   |   | $ | 374 |   |   |   | 1.1 | % |
| Bank line interest expense      |   |                            | 1,317  |   |                           |   | 1,252 |   |   |   | 65 |   |   |   | 5.2 | % |   |   | 3,938 |   |   |   | 4,319 |   |   |   | (381 | ) |   |   | -8.8 | % |
| Debt prepayment expense         |   |                            | -      |   |                           |   | - |   |   |   | - |   |   |   | 0.0 | % |   |   | 53 |   |   |   | - |   |   |   | 53 |   |   |   | 0.0 | % |
| Mortgage loan cost amortization |   |                            | 219    |   |                           |   | 265 |   |   |   | (46 | ) |   |   | -17.4 | % |   |   | 677 |   |   |   | 1,010 |   |   |   | (333 | ) |   |   | -33.0 | % |
| Bank loan cost amortization     |   |                            | 174    |   |                           |   | 278 |   |   |   | (104 | ) |   |   | -37.4 | % |   |   | 637 |   |   |   | 749 |   |   |   | (112 | ) |   |   | -15.0 | % |
|                            |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest expense          |   | $                               | 13,669 |   |                           | $      | 13,672 |   |   | $ | (3 | ) |   |   | 0.0 | % |   | $ | 41,051 |   |   | $ | 41,450 |   |   | $ | (399 | ) |   |   | -1.0 | % |

|                                                  |   | Three Months Ended September 30 |   |   | Nine Months Ended September 30 |   |
|-------------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
|                                                  |   |                            |   |   |                           |   |   | Increase |   |   | % |   |   |   |   |   |   |   |   | Increase |   |   | % |   |
|                                                  |   | 2010                            |   |   | 2009                           |   |   | (Decrease) |   |   | Change |   |   | 2010 |   |   | 2009 |   |   | (Decrease) |   |   | Change |   |
| Discontinued operations:                              |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Income from discontinued operations |   | $                               | 6      |   |                           | $      | 105 |   |   | $ | (99 | ) |   |   | -94.3 | % |   | $ | 194 |   |   | $ | 309 |   |   | $ | (115 | ) |   |   | -37.2 | % |
|   Gain on sale of real estate from          |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      discontinued operations |   |                            | -      |   |                           |   | - |   |   |   | - |   |   |   | 0.0 | % |   |   | 8,518 |   |   |   | - |   |   |   | 8,518 |   |   |   | 0.0 | % |
| Total discontinued operations                         |   | $                               | 6      |   |                           | $      | 105 |   |   | $ | (99 | ) |   |   | -94.3 | % |   | $ | 8,712 |   |   | $ | 309 |   |   | $ | 8,403 |   |   |   | 2719.4 | % |

| Office Property |   | Location       |   | SquareFeet |   | Date ofSale |     | Net SalesPrice |   |   | Net BookValue ofReal Estate |   |   | Gain onSale |   |
|-----------------|--------|----------------|--------|------------|--------|-------------|----------|----------------|--------|--------|-----------------------------|--------|--------|-------------|--------|
| One Park Ten    |   | Houston, Texas |   |       | 163    |        | 04/15/10 |           | $      | 14,924 |                        |   | $      | 6,406       |   |   | $ | 8,518 |   |

----

----

|                                        |   |        |   |          |   |     |     | Outstanding |   |
|---------------------------------------------|--------|-------------|--------|---------------|--------|----------|----------|-------------|--------|
| Line of Credit                              |   | Lender      |   | Interest Rate |   | Maturity |     | Balance     |   |
| $15.0 million unsecured line of credit (1)  |   | PNC Bank    |   |          | -      |     | 04/27/11 |        | $      | - |   |
| $236.0 million unsecured line of credit (2) |   | Wells Fargo |   |          | 4.9    | %        | 04/27/11 |        |   | 40,000 |   |
| $60.0 million unsecured term loan (3)       |   | Wells Fargo |   |          | 4.9    | %        | 04/27/11 |        |   | 60,000 |   |
|                                        |   |        |   |          | 4.9    | %        |     |        | $      | 100,000 |   |

| (1) | The interest rate on the $15.0 million unsecured line of credit with PNC Bank is currently LIBOR plus 200 basis points. The Company pays fees on the unused portion of the line of 25 basis points. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The $236.0 million unsecured line of credit is led by Wells Fargo and syndicated to eight other banks. The interest rate on the line of credit is currently LIBOR plus 130 basis points or the Prime interest rate plus 25 basis points.  At September 30, 2010, all amounts outstanding under the line of credit with interest rates not fixed by an interest rate swap agreement were borrowed at LIBOR plus 130 basis points. The Company pays an annual administration fee of $35,000 and fees on the unused portion of the revolver ranging between 12.5 and 20 basis points based upon overall Company leverage, with the rate set at 20 basis points at September 30, 2010. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | The $60.0 million unsecured term loan is led by Wells Fargo and syndicated to eight other banks. The interest rate on the term loan is fixed by an interest rate swap agreement. Excluding the interest rate swap agreement, the interest rate on the term loan is LIBOR plus 130 basis points. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|    |   |                  |   |     |    |     |     |           |          |   |   |   | Fair Market Value |   |
|---------|--------|-----------------------|--------|----------|---------|----------|----------|----------------|---------------|--------|--------|--------|-------------------|--------|
|    |   |                  |   |     |    |     |     |           |          |   |   |   | Liability         |   |
| Type of |   | Balance Sheet         |   | Notional |    | Maturity |     |           |          | Fixed  |   |   | September 30      |   |
| Hedge   |   | Location              |   | Amount   |    | Date     |     | Reference Rate |          | Rate   |   |   | 2010              |   |   | 2009 |   |
| Swap    |   | Accounts payable      |   |     |    |     |     |           |          |   |   |   |              |   |   |   |   |
|    |   | and other liabilities |   | $        | 100,000 |     | 03/31/11 |           | 1-month LIBOR |   |   | 4.935  | %                 |   | $ | (1,690 | ) |   | $ | (4,167 | ) |
| Swap    |   | Accounts payable      |   |     |    |     |     |           |          |   |   |   |              |   |   |   |   |   |   |   |   |
|    |   | and other liabilities |   | $        | 23,500  |     | 12/01/14 |           | 1-month LIBOR |   |   | 5.800  | %                 |   |   | (2,767 | ) |   |   | (1,654 | ) |
|    |   |                  |   |     |    |     |     |           |          |   |   |   |              |   | $ | (4,457 | ) |   | $ | (5,821 | ) |

|                                      |   |   | Total      |    |   |     |   |    | Recurring    |   |
|-------------------------------------------|--------|--------|------------|---------|--------|----------|--------|---------|--------------|--------|
|                                      |   |   | Mortgage   |    |   | Balloon  |   |    | Principal    |   |
|                                      |   |   | Maturities |    |   | Payments |   |    | Amortization |   |
| Schedule of Mortgage Maturities by Years: |   |   |       |    |   |     |   |    |         |   |
| 2010*                                     |   |   | $          | 41,917  |   |     | $      | 38,623  |         |   | $ | 3,294 |   |
| 2011                                      |   |   |       | 113,914 |   |     |   | 102,694 |         |   |   | 11,220 |   |
| 2012                                      |   |   |       | 58,034  |   |     |   | 48,408  |         |   |   | 9,626 |   |
| 2013                                      |   |   |       | 9,943   |   |     |   | -       |         |   |   | 9,943 |   |
| 2014                                      |   |   |       | 10,595  |   |     |   | -       |         |   |   | 10,595 |   |
| 2015                                      |   |   |       | 37,971  |   |     |   | 26,856  |         |   |   | 11,115 |   |
| Thereafter                                |   |   |       | 543,078 |   |     |   | 529,903 |         |   |   | 13,175 |   |
| Total                                     |   |   | $          | 815,452 |   |     | $      | 746,484 |         |   | $ | 68,968 |   |
| Fair value at 09/30/10                    |   |   | $          | 802,724 |   |     |   |    |         |   |   |   |   |

| *Remaining three months |
|-------------------------|

----

----

----

|                                                          |   | Nine Months Ended |    |
|---------------------------------------------------------------|--------|-------------------|---------|
|                                                          |   | September 30      |    |
|                                                          |   | 2010              |    |   | 2009 |   |
| Net income (loss)                                             |   | $                 | 7,570   |   |   | $ | (1,424 | ) |
| Adjustments to net income (loss):                             |   |              |    |   |   |   |   |   |
| Preferred dividends                                           |   |              | (4,137  | ) |   |   | (3,600 | ) |
| Depreciation and amortization                                 |   |              | 65,257  |   |   |   | 68,246 |   |
| Depreciation and amortization – discontinued operations |   |              | 121     |   |   |   | 455 |   |
| Noncontrolling interest depreciation and amortization         |   |              | (12,837 | ) |   |   | (14,939 | ) |
| Unconsolidated joint venture depreciation and amortization    |   |              | 253     |   |   |   | 630 |   |
| Gain on sale of real estate                                   |   |              | (8,518  | ) |   |   | (470 | ) |
| Funds from operations attributable to common stockholders     |   | $                 | 47,709  |   |   | $ | 48,898 |   |

----

|                 |   |         |   |   |       |   |   | Total Number        |   |   | Maximum Number        |   |
|----------------------|--------|--------------|--------|--------|------------|--------|--------|---------------------|--------|--------|-----------------------|--------|
|                 |   |         |   |   |       |   |   | of Shares Purchased |   |   | of Shares that        |   |
|                 |   | Total Number |   |   | Average    |   |   | as Part of Publicly |   |   | May Yet Be            |   |
|                 |   | of Shares    |   |   | Price Paid |   |   | Announced Plans     |   |   | Purchased Under       |   |
| Period               |   | Purchased    |   |   | per Share  |   |   | or Programs         |   |   | the Plans or Programs |   |
|                 |   |         |   |   |       |   |   |                |   |   |                  |   |
| 07/01/10 to 07/31/10 |   |         | 7,759  | (1)    |       | $      | 14.28  |                |   |   | -                     |   |   |   | - |   |
| 08/01/10 to 08/31/10 |   |         | 786    | (1)    |       |   | 14.16  |                |   |   | -                     |   |   |   | - |   |
| 09/01/10 to 09/30/10 |   |         | -      |   |       |   | -      |                |   |   | -                     |   |   |   | - |   |
| Total                |   |         | 8,545  |   |       | $      | 14.27  |                |   |   | -                     |   |   |   | - |   |

| (1) | As permitted under the Company’s equity compensation plan, these shares were withheld by the Company to satisfy tax withholding obligations for employees in connection with the vesting of stock. Shares withheld for tax withholding obligations do not affect the total number of shares available for repurchase under any approved common stock repurchase plan. At September 30, 2010, the Company did not have an authorized stock repurchase plan in place. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.1. | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  |
|-------|-----------------------------------------------------------------------------------------------------|
| 31.2  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

|                         | PARKWAY PROPERTIES, INC |                     |
|------------------------------|-------------------------|--------------------------|
|                         |                    |                     |   |
| DATE:  November 3, 2010 | BY:                     | /s/ Mandy M. Pope   |   |
|                         |                    | Mandy M. Pope, CPA       |   |
|                         |                    | Chief Accounting Officer |   |
|                         |                    |                     |   |