CBRE Florida Market Perspective Mid Year 2011

8/4/2019 CBRE Florida Market Perspective Mid Year 2011

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www.cbre.com/fmp

FLORIDAMARKET

PERSPECTIVEMID-YEAR 2011


2/26 2011, CB Ricrd Eis, Ic

Florida Market Perspective:: MID-YEAR

FLORIDA BROKERAGE MANAGEMENT

All Florida/Miami

Mary Jo Eaton 305.428.6329

Broward & Palm Beach Counties

Ken Krasnow 561.393.1649

Southwest Florida

Larry Foster, CBRE Partner 239.659.1447

Tampa Bay/Sarasota

Raymond Sandelli 813.273.8450

Orlando

Bill Moss 407.839.3140

Jacksonville

James P. Citrano 904.630.6344

CB Richard Ellis statistics contained herein may represent a

different data set than that used to generate National Vacancy

and Availability Index statistics published by CB Richard Ellis

Corporate Communications Department or CB Richard Ellis

research and econometric forecasting unit, CBRE Econometric

Advisors. Information herein has been obtained from sources

believed reliable. While we do not doubt its accuracy, we have

not veried it and make no guarantee, warranty or representation

about it. It is your responsibility to independently conrm

its accuracy and completeness. Any projections, opinions,

assumptions or estimates used are for example only and do

not represent the current or future performance of the market.

2011 CB Richard Ellis, Inc.

www.cbre.com/fmp



Florida Market Perspective:: MID-YEAR

FLORIDA OUTLOOK

We are proud to present the CB Richard Ellis Florida Mid-Ye

2011 Market Perspective. This collective effort of our brokera

professionals in Florida promotes our goal of providing o

clients with the best market knowledge to make informed re

estate decisions.

As of mid-year 2011, we see a marked turning point for

Florida commercial real estate market that began late 201

Positive trends have sustained over the past six months and o

research gures show a slow recovery underway.

During the remainder of 2011 we anticipate seeing mo

leasing and sales activitylargely in prime submarkets.

Floridas consumer condence rating remains above t

national average.

Select companies are beginning to re-establish th

condence in the market through expansions, long-te

lease commitments and employment opportunities.

Multihousing properties are highly targeted by investors

Florida. Occupancy levels are high and the gap betwe

asking price and purchase price has narrowed.

Interest from international investors continues, particularly

the core markets. Such investors were absent for the bet

part of three years.

The expansion of the Panama Canal and subseque

expansions of Floridas seaports are providing a posit

outlook for Floridas industrial markets.

Distressed assets continue to be a concern for the commerc

market, but Floridas lengthy foreclosure process is yieldi

a steady trickle of distressed asset transactionsnot qu

the wave predicted by the market two years ago.

Our outlook for Florida is a slow and steady recovery over t

next ve years. For each challenge our market faces today,

solution arises ready to counter negative impact. The Sunsh

State will always boast an inviting climate and provide a gre

live-work-play lifestyle. As our state continues to promo

favorable conditions for employers, residents and tourists,

are condent a strong recovery is in place for Florida.

CBRE Florida Brokerage Leadership



Florida Market Perspective:: MID-YEAR MIaMI-DaDE MaRkEt

LEASING ACTIVITY

Ofce

Miamis ofce market continues to favor tenants. Vacancy rates a

still in the double-digit range and new construction is schedu

for delivery during the second half of 2011. New constructi

in the market includes 600 Brickell Ave at Brickell World Plaz

a 600,000 SF Class A tower in the Brickell submarket and t

rst pre-certied Platinum LEED building in Florida. Addition

space availability will prolong the competition among landlo

to attract tenants. To curtail tenants ight to quality, landlo

are offering aggressive renewal terms and aiming to secu

tenants for longer periods. Tenants, however, are more interest

in short-term deals due to economic uncertainty.

New ofce buildings in Miamis central business dist

continue to target tenant relocations through generous tena

improvement and rent concession packages. In Miamis thr

most desirable submarkets, Brickell, Downtown and Airp

West, free rent is consistent at about one month per year

lease while tenant improvement allowances range from $for previously occupied space to $80 for unnished space. T

broader outlook for Miamis ofce market remains positive w

beginning of recovery already underway. A more immedia

perspective shows concern for the new, Class A ofce product

approximately 1.9 MSFthat will have been delivered betwe

2010 and year-end 2011.

With an overall vacancy of approximately 20% in Miami, tenantsmost submarkets have many options when looking for space. Lease raare stabilizing; however, concessions such as free rent and increas

tenant improvement allowances are widely available. In the Downtoand Brickell submarkets, many tenants have moved around, takadvantage of opportunities created with the opening of Wells FarCenter and 1450 Brickell. This trend will continue with the anticipatdelivery of Brickell World Plaza. As a result, lease rates in these tsubmarkets are likely to dip. Leasing in Coral Gables and West Dadeparticularly active in the Class A market.

Carter Hopkins, First Vice President

Net Absorptions (SF)

Average Asking Lease Rates

Vacancy Rates n Ofce n Industrial n Retail

2011 MID-YEAR LEASING STATISTICS

Rentable SF Overall Vacant SF Overall Vacancy Net Absorption SF Under Construction SF Average Asking Ra

Ofce 43,568,406 7,966,136 18.3% (99,349) 832,184 $30.03 FSG

Industrial 217,996,701 16,317,581 7.5% 1,808,233 0 $6.72 IG

Retail 45,315,859 2,347,207 5.2% 111,183 540,414 $25.89 NNN

HISTORICAL LEASING STATISTICS

n Ofce n Industrial n Retail


0%

5%

10%

15%

20%

2006 2007 2008 2009 2010 2011 YTD

$0

$5

$10

$15

$20

$25

$30

$35

2006 2007 2008 2009 2010 2011 YTD

(8,000,000)

(6,000,000)

(4,000,000)

(2,000,000)

0

2,000,000

4,000,000

6,000,000

2006 2007 2008 2009 2010 2011 YTD




Industrial

Industrial leasing activity continues to demonstrate strong

demand with over 3 MSF of space leased during the rst half

of the year and positive net absorption for the fth consecutive

quarter. While last years mid-year gures showed greater

activity, the lower gures of today are a result of limited supply.

Space requirements are reported to exceed 1.5 MSF, however the

majority of the desired spaceClass A warehouse/distribution

has been absorbed in the past 18 months. Logistics companies,

food manufacturers and distributors, distributors of cut owers,

computers and telephone equipment are some of the most active

industries looking for industrial space.

Because of limited supply, landlords are raising asking rental

rates for Class A space. Meanwhile, leasing activity in the inner

core submarkets remains slow with rising vacancy rates and

negative absorption gures. Tenants looking for below-marketrates will nd them in these submarkets, especially those looking

for large blocks of space.

The Miami industrial leasing prospective has made a signicant

turnaround from the dog days of 2009, which continued midwaythrough 2010. We could label 2011 the new beginning, as leasingactivity continues month after month to make an impressive reboundand vacancy ratios continue to shrink. Projections for 2012 signal evenbetter times ahead.

Ron Berger, First Vice President

Retail

The retail leasing market in Miami-Dade County has the lowest

vacancy rate in the state of Florida. Very few spaces over 20,000

SF remain available for lease. Cutler Ridge is one of the only

areas in Miami with large spaces available for big-box users.

Areas in high demand continue to be Aventura, Pinecrest,

Kendall Dr., South Beach, Brickell and Doral. While demand is

up, there are few options for many tenants looking to occupy

space in these markets, leading to effective net rent increases.

With growing demand from retailers, developers are beginning

to announce plans for new retail centers. Swire Properties

announced plans to develop Citi Center Brickell off Brickell

Avenue, near Mary Brickell Village. Scheduled to break ground

in 2012, the $700-million, mixed-use project will include

residential, hotel, mid-rise ofce, and extensive street front

retail. Genting Group purchased the Miami Herald building

in June 2011 and promptly announced plans to redevelop t

waterfront property into a resort-style center called Resort Wo

Miami that is likely to include a retail component. This project w

be delayed until The Miami Herald and Brown Mackie Colle

vacate in 2013.

The next 18 to 24 months will be a tough time for retailers look

to occupy space as the market shows little availability and little ndevelopment.

Paco Diaz, Senior Vice President

SALES ACTIVITY

Ofce

Transaction volume for ofce sales in Miami through mid-ye

totaled $430 million, a $230-million increase over the sa

period in 2010. Contributing to the increase were the sales

SunTrust International Center and the Miami Herald buildin

accounting for 73% of the total transaction volume for t

period. The Miami Herald transaction along with the Easte

National building sale, both in the central business distr

were purchased as redevelopment opportunitiesindicating t

return of nancing, construction and jobs in this area. REITs a

institutional investors remain active for deals in core markets,

they are less affected by the availability of nancing. Buildings

good locations with high occupancy and long term leases a

seeing cap rates decline and asking price increase.

Investment sales activity has been moderate through 2011; howevwe expect an increase across all sectors due to improving marconditions, lower cap rates and higher market value from the impactrecent deals.

Chris Lee, Vice Chairman

Industrial

There have been 16 sales at the midpoint of 2011 with just ov

$102 million in total transaction volume. This includes the sa

of Airport Industrial Center II from by TA Realty which was

debtor-controlled sale of the property. The biggest sale of tyear by the end of June was the sale of Preferred Freezer Miam

The property was purchased by Frisa Inc in an all cash deal

the 168,201 SF, 100% occupied property for $26.6 millio

Acquisition of land for the past three years had declined bu

beginning to see a pickup in activity. Institutions and develop




are actively seeking and acquiring development sites as a new

wave of construction is anticipated to begin in 2012.

Year-to-date closings do not accurately represent the increased interestfrom institutional investors as we expect transaction volume to rise in thesecond half of the year.


Retail

Miami continues to see strong interest from retail property

investors, with $422 million in total transaction volume, more

than any other market in the state of Florida. Aiding the high

total transaction volulme was the sale of the former Omni Mall

that traded for $77 million. The property was in distress with

high vacancy after renovating it to be a mixed use retail, hotel

and ofce property. Class A cap rates for grocery anchored

neighborhood and community centers is 6.25% to 7.0%. Cap

rates are anticipated to remain stable through the remainder of

the year.

Miami remains a highly desirable retail investment arena for a varietyof buyer types. As has been true in the past, the volume of retail offeringsis likely to remain low and assets that come to market will likely receivedisproportional buyer interest and trade at higher prices relative tosimilar properties in other markets.

Casey Rosen, Senior Vice President

Multihousing

Demand has soared, thanks to foreclosures pushing homeowners

towards renting. With supply down and limited product being

delivered in the near future, most multihousing properties are

experiencing higher occupancy levels. This is aiding rental rate

increases across Miami. Sell, renance, or hold remains the

name of the game with investors trying to calculate maximum

value. With both low interest rates and cap rates, sellers are in

a premium position to maximize value. Class A properties are

trading at 4.75% to 5.25% cap rates, while Class B and Class C

properties are trading between 6% and 12%. In the second half

of 2011 and beginning of 2012, we anticipate more value-add

opportunities to begin to resurface as buyers seek higher yield

opportunities and more nancing becomes available.

In 2011, we expect continued improvement in overall values andincreased loan-to-value ratios, and for lenders to gradually take onmore risks in terms of deal characteristics, strategy and geography.

Robert Given, Vice Chairman

OUTLOOK

Mary Jo Eaton, Senior Managing Director

With the momentum from the end of 2010 carrying over to t

rst half of 2011, it is clear that Miami is on the long path

recovery. With many challenges still ahead, including the questi

of job growth, there is increasing condence that recovery hbegun fueling growth in the commercial real estate sector.

corporate and consumer condence grows, tenant expansio

and investment strategies will continue to grow. The expansi

of the Panama Canal and the investment of funds from the sta

to dredge the Port of Miami to accommodate larger ships furth

fuels excitement for the city. This has the potential to directly impa

the industrial, retail and ofce markets as logistic rms consid

their supply ow and take advantage of market conditions. W

the increasing leasing and sales activity, particularly in Class

industrial, developers and investors are looking to purchase lafor the possibility of speculative and build-to-suit developme

Miami is positioned to bounce back and continue on the path

a prominent global city.



Florida Market Perspective:: MID-YEAR BRowaRD County

LEASING ACTIVITY

Ofce

Activity in the Broward County ofce market has remain

relatively slow through the rst half of 2011. Tenant conden

is increasing in terms of willingness to commit to longer te

leases. In 2009 and 2010, tenants were trying to do short-te

renewals due to so much uncertainty in the economy. Tena

are now trying to lock in and take advantage of aggress

lease terms. Still, the majority of leasing activity year-to-date h

come from rightsizing or renewals. There have been some larg

tenants looking in the market for possible relocation in 201

concentrating their focus in the western areas of Broward Coun

Interestingly, there is potential for large blocks of sublease spa

to come to the market from the for-prot education sector. N

regulations are placing pressure on for-prot schools, ma

of which opened during the economic downturn when t

unemployed looked to strengthen their resumes.

In reality, the Broward ofce market has stabilized, although re

estate professionals remain cautiously optimistic about recoveWithout a signicant market recovery, landlords continue

offer aggressive concessions and are expected to maintain t

through year-end.

Tenant perception is that rental rates have reached or are very closereaching rock bottom. Activity in the market, primarily western BrowCounty, is encouraging. The vacancy and unemployment rates remaintheir highest levels since 2000; however, if the increased leasing activis able to be converted to actual absorption of ofce space, 2012 co

prove to be the beginning of a recovery in this market.

Deanna Lobinsky, First Vice President

Industrial

The industrial market continues to show small indicators tha

is on the road to recovery, even if it is a long one. A mod

amount of positive absorption in the rst half of 2011 sho

that tenants are beginning to become active in leasing spa

again. However, real estate professionals are hesitant to say th






Ofce 26,512,188 4,984,973 18.8% (22,573) 0 $16.76 NNN

Industrial 94,372,590 7,946,442 8.4% 90,255 0 $6.92 NNN

Retail 56,536,589 5,316,413 9.4% 97,496 0 $21.58 NNN




0%

5%

10%

15%

20%

2006 2007 2008 2009 2010 2011 YTD

$0

$5

$10

$15

$20

$25

2006 2007 2008 2009 2010 2011 YTD

(5,000,000)

(4,000,000)

(3,000,000)

(2,000,000)

(1,000,000)

0

1,000,000

2,000,000

2006 2007 2008 2009 2010 2011 YTD




Browards industrial market is experiencing a resurgence. With

low deal volume and few large tenants ready to take up the

surplus space on the market, the pace of recovery will remain

slow. With a slower market recovery, landlords are anticipated

to keep rents competitive and offer concessions such as free rent

and tenant improvement allowance through the second half of

2011.

Broward and Palm Beach are still trying to shake off the effects of

the housing bust and overall poor economy. With such a large

exposure to international trade lifting the Miami-Dade County

industrial market, it seems to have turned the corner and is well

on the way to a full recovery. Broward and Palm Beach are still

searching for the driver that will lead them out of the downturn.

The Broward County industrial market remained in a state ofequilibrium during the rst half of 2011. Stagnant vacancy rates coupled

with modest positive absorption showed a slow-down in activity andas spaces are leased, an almost equal amount are coming back on themarket.

Harry Tangalakis, SIOR, Senior Vice President

Retail

Broward Countys retail market is cruising at a steady pace on the

road to recovery. Modest positive absorption is an indication of

stability in the retail sector, but has yet to have a signicant impact

on vacancy rates. Demand from mid-size tenants, those ranging

between the 10,000 SF to 20,000 SF, remained limited, but themarket is beginning to see a pick-up in interest from tenants

looking to open up locations in Broward County. Large discount

retailers like hhgregg and Big Lots Furniture have expanded their

reach into South Florida. However, the majority of transactions

have been smaller deals below the 5,000 SF range.

Steady but calm conditions have landlords holding off on

increasing rents and continuing to negotiate with tenants. Free

rent, percentage rent and tenant improvement costs are the

popular tools landlords offer retail users as options during lease

discussions. Real estate professionals expect growth to remain

moderate over the next 12 months as improvements are projected

to take a stronger hold toward the second half of 2012.

Activity in the market has remained steady throughout the rst half

of 2011. Although landlords still have to offer fairly aggressive dealsto attract tenants to their shopping centers, there are more prospectsin the market than in recent years. Prospects realize that now is thetime to strike a deal. The majority of the deals done in the market

include a combination of tenant improvement allowance and base reabatements. Fast casual restaurants and value-oriented discounters astill leading the charge.

Katherine Ridgway, Leasing Associate

SALES ACTIVITY

Ofce

With $170 million in total transaction volume recorded

the rst half of 2011, the Broward ofce investment mark

demonstrated that large institutional sales have returned. Du

Realtys acquisition of the Premier Properties portfolio and t

Weston Park of Commerce deals were the major contributo

to the sales totals recorded as of mid-2011. This comes on t

heels of Duke Realtys purchase of Royal Palm last August

over $92 million. Sales activity is up from the rst half of 201

going from roughly 11 transactions to 16 in 2011. Distressassets continue to be the most highly sought after asset cla

with the most capital chasing it. With the ofce leasing mark

still slow to recovery, concessions will continue to drag down n

effective rents.

Broward has seen healthy levels of investment sales activity for tropofce properties over the last 12 months. We expect this trend to contin

and expand to include increased sale activity of Class B assets outside core CBD.


Industrial

Sales volume for industrial properties in Broward Cou

increased from 16 total transactions in the rst half of 20

to 25 in the rst half of 2011, a 56% increase. Duke Rea

completed another acquisition of Premier Properties that tota

approximately 1 MSF spread through nine industrial buildin

Vacancy rates appear to be holding at roughly 10%, howev

lease rates continue to decline and are projected to contin

declining into 2012. This will continue to place pressure on n

effective rents and concessions, which investors in the Browa

market will continue to have to consider as they underwr

properties.

Institutional investors, REITs and private equity funds have all cooff the sideline clamoring for quality Class A and B industrial offerinnow that positive absorption and rental rate stabilization is evidethroughout the county.

Scott ODonnell, Senior Vice President




Retail

Retail sales by mid-year 2011 have surpassed 2010 levels.

Investors continue to focus their investment parameters on both

ends of the risk spectrum, value-add, distressed deals and core

Class A centers. Sales of distressed centers accounted for 25%

of the transactions by mid-year, while several institutional quality

centers have traded, including Sawgrass Center and Tower

Shops. More distressed product is anticipated to be brought to the

market as distressed loans lter through the foreclosure process.

However, market fundamentals have begun to stabilize Broward,

providing more surety to investor underwriting assumptions.

More product availability combined with investor perception thatvaluations have bottomed should drive higher sales activity in Browardthroughout the balance of 2011.

David Donnellan, First Vice President

Multihousing

The multihousing market in Broward County continues to attract

a high level of interest from a wide array of investors. Similar to

2010, sales volume has been slow for the rst half of 2011, but

it is expected pick up in the nal two quarters. Overall, market

fundamentals remain strong, with vacancy rates and concessions

continuing to decrease. The forecast for the next ve years shows

continued strength in the market with rental rates forecasted to

rise between 2.0% and 4.6% annually. Investors are aggressively

seeking well-positioned development sites, hoping to take

advantage of these improving market fundamentals. Starting at

the end of 2010, there has been a sharp increase in interest for

multihousing land sites.

We anticipate cap rate compression to continue as investor sentimentremains positive and they look to capitalize on the strong marketfundamentals. Value-add opportunities have seen a high level ofinterest in well-located markets and are proving returns above 20%.Additionally, the developers are back and looking to take advantage inthe lack of quality Class A product and continued decrease in the overall

percentage of home ownership.

Robert Given, Executive Vice President

OUTLOOK

Ken Krasnow, Managing Director

No major shifts in market conditions are projected for t

remainder of 2011, yet the overall climb towards recove

continues. The greater Fort Lauderdale area still faces challeng

as the unemployment rate hovers around 9%. Renewtransactions continue to dominate the market as overall dema

for new space remains limited. As corporate and consum

condence grows, tenant expansion and the ight-to-quality tre

will grow. The regions strong ties to the residential market co

hinder growth. Residential construction has not yet returned

the market, which will continue to slow the recovery of the loc

economy. Inventory remains abundant from foreclosures a

short sales but demand has yet to pick up as consumers rema

cautious. These factors will likely create a slow and steady clim

to recovery as the needs for goods and services begin to gatraction during the rst half of 2013.



Florida Market Perspective:: MID-YEAR PalM BEaCh County

LEASING ACTIVITY

Ofce

More tenants are active the market to see what Palm Bea

landlords have to offer. In the rst half of 2011, leasing activ

appears to mirror the increased levels seen in last year. In 201

tenants were searching for new lease opportunities but it w

largely restricted to corporations and high credit tenants. Rath

than Fortune 1000 companies touring the market this ye

smaller local companies are the active seekers, focusing on t

southern half of Palm Beach County. The typical size of the

tenants runs from 3,000 SF to 7,000 SF.

With double-digit vacancy rates, lowered average asking lea

rates and news word of concession offers, tenants are pressi

for the best deals in the market. While interest is higher for leas

ofce space, landlords are more discerning over whom to of

concessions. After a few years of move outs and compan

downsizing, institutional landlords are shying away from offeri

high amounts of tenant improvement allowances to build o

space to lower tier credit tenants. Landlords are qualifyitenants earlier than usual.

Activity in the ofce market continues to illustrate signs of improveme

However, vacancies are still higher than desired. No one expects a retuto landlord dominance or speculative construction anytime soon amost believe the ofce sector has dodged the collapse experienced in

residential market.

Mike Erickson, Senior Vice President

Industrial

With weaker conditions in the Palm Beach industrial mark

including double-digit vacancy and declining asking ra

compared to a year ago, tenants can easily nd deal opportuniti

A renewed interest by tenants to examine the market is aiding

increased condence in the recovery of the market. Howev

very few tenants looking at leasing or purchasing space in Pa

Beach right now are new to the area. With growth coming o






Ofce 23,323,226 6,071,928 26.0% 40,697 0 $17.32 NNN

Industrial 45,463,310 5,156,985 11.3% 184,704 0 $6.23 NNN

Retail 52,134,469 4,659,928 8.9% (160,729) 0 $19.47 NNN




0%

5%

10%

15%

20%

25%

30%

2006 2007 2008 2009 2010 2011 YTD

$0

$5

$10

$15

$20

$25

2006 2007 2008 2009 2010 2011 YTD

(2,000,000)

(1,500,000)

(1,000,000)

(500,000)

0

500,000

1,000,000

1,500,000

2006 2007 2008 2009 2010 2011 YTD




from existing tenants, the recovery of the Palm Beach industrial

market will continue at a slow crawl.

Institutional property owners are doing everything that they

possibly can to keep the base rate as high as possible. Therefore,

many are offering a signicant amount of free rent and tenant

improvement allowances to entice new tenants to their building.Some are even offering a moving allowance to rst-time tenants.

While more tenants are in the market looking for space, most

of them are looking to relocate from an existing space with

the primary goal of lower base rents and concessions. Tenants

ultimately end up moving when their current landlord cannot

accommodate changes in space requirements, be it expansions

or contractions.

Industrial tenants seeking space has increased due to the opportunitiescreated by double-digit vacancy rates and the corresponding reduction

in rents.

Robert Smith, Senior Vice President

Retail

Over the past year, there has been an increase in leasing activity

from both local and national tenants, indicating a perception

that the market has hit the bottom and that the worst is behind

us. Retail sales have risen month to month for the past year,

however rising gas prices and a stagnant job and housing market

have taken some steam out of consumer spending. Retailers with

the best sales performance right now are discount and luxurystores. The mid-priced merchandise market has yet to experience

the same success. Retailers are paying more attention to lease

administration, particularly in terms of xed option rates, caps

on operating expenses, limited guaranties and kick out clauses.

There appears to be general stabilization in average asking

lease rates and total vacancy rates. The performance in

shopping centers can vary depending on the quality of the

center, anchors and the submarket. Grocery anchored centers

are generally outperforming other retail types as grocers are

largely a recession-proof anchor tenant. High unemployment

and low consumer disposable income continues to restrain retail

sales for mom and pop tenants, limiting absorption of vacant

retail space.

Health and personal care retailers are faring well and clothing andaccessories stores are beneting from the seasonal weather. National

and regional tenants are slowly expanding back into the market but are

largely focused on prime locations with a strong emphasis on visibiand co-tenancy and with the expectation that landlords will continuebe aggressive with concessions such as tenant improvements and frent.

Lisa Ferrazza, Vice President

SALES ACTIVITY

Ofce

Ofce sales activity in Palm Beach has exploded compared

the rst half of 2010. The rst half of 2010 saw three record

transactions of ofce buildings over 20,000 SF compared w

17 transactions thus far this year. Several stabilized Class

properties have traded with cap rate ranges between 6% a

7%, based on forward-looking nancial data. While this

promising, there have also been an equal number of distress

sales of properties with values trading between $40 and $50 psquare foot and little to no net operating income. Properties th

are in a distressed situation continue to work their way throu

the pipeline, albeit slowly. Interestingly the demand on t

buyer side is for either Class A trophy properties or signican

distressed opportunities. Stabilized Class B/C assets with lit

room for value-add opportunities are not trading with the simi

frequency.

The trickle effect of the distressed assets still plagues buyers effortsput capital to work. Palm Beach Countys high vacancy rates, especia

in the Boca/Delray submarkets, are going to continue to see lower renrates and increased downtime assumptions when underwriting dealsthese submarkets.

Marty Busekrus, CCIM, Senior Associate

Industrial

Palm Beach has the fortune of a very low vacancy rate, hoveri

around 11% for all industrial properties. Interestingly though, t

asking rental rates are also declining, but seem to be leveli

off at $6.23 NNN. The volume of industrial sales has increas

almost three-fold, going from just four sales in the rst half

2010 to 11 in the rst half of 2011. Although a good sign,

sales in a market with 62 MSF of industrial product spread acro

3,266 buildings is still considered a trickle. That represents j

3.4% of the overall inventory indicating sellers and buyers a

still miles apart on pricing.




Blend and extend is still the preferred workout method for distressedassets and their lenders. Only a small amount of distressed properties willcome to market as this process continues into the foreseeable future.

Marty Busekrus, CCIM, Senior Associate

Retail

Deal volume for retail properties in Palm Beach has continued

to build momentum during the rst part of 2011. Capital seems

focused at both ends of the risk spectrum, either seeking core

Class A grocery anchored centers or value-add/distressed

properties. Capitalization rates for Class A centers continue to

trend in the low 6% cap rate range, with some compression in

cap rates recently occurring for Class B/C properties as investors

move down the asset quality chain seeking better yields. Cap

rates for Class B/C range between 8% and 9%. Single tenant

retail properties remain in very strong demand with further cap

rate compression in 2011 as the availability of newly developedproduct has been limited and not able to meet the strong demand

by investors looking for a stable and safe investment.

Signicant amounts of capital allocated for retail has been sitting

on the sidelines. With market fundamentals appearing to stabilizeand a general feeling that the market has reached bottom in terms ofvaluations, we anticipate continued strong demand for all classes ofretail product with demand outpacing supply and causing improvedvaluations in the short term.

Dave Donnellan, First Vice PresidentMultihousing

In 2011, the Palm Beach multihousing properties continue to

see increased interest from investors. Year-to-date transaction

volumes total just over $126 million, with an average of

$80,500 per unit. Improving market fundamentals, low interest

rates and a mound of private and foreign investors signicantly

spurred sales activity throughout the region. Now into 2011,

overall multihousing market fundamentals are continuing to

improve. Most multihousing properties are experiencing higher

occupancies and rents which are translating into higher netoperating income. Occupancies have increased in Palm Beach to

93.8%. With limited new supply under construction, and positive

market fundamentals, occupancies are forecast to increase at

least another 200 basis points over the next ve years.

We anticipate more Class B and value-add type opportunities will occurin 2011 as buyers seek higher yield opportunities and nancing becomes

more available in this product type. Class B and C rates vary based on

vintage and location, however, in general, Class B properties are tradbetween 5.5% and 6.25%; and Class C properties can be anywhere oa 7.5% cap rate.

Richard Tarquinio, CCIM, Senior Vice President

OUTLOOK

Ken Krasnow, Managing Director

Activity in the Palm Beach County market has shown continu

improvement since the 2008/2009 downturn. Market dynam

currently include declining lease rates and decreasing occupan

rates; however these are starting to level off. We anticipate th

sale and lease activity will increase in the second half of 20

and going into 2012. Future job growth will aid the increase

occupancy, rent and sale pricing levels. Lease rates are lik

to remain static for the short term, while concessions in t

forms of free rent and tenant improvement allowances are nostabilizing. While rental rates continue to roll down in 2011 fro

real net effective rents that were 25% to 30% higher during t

peak occupancy years of 2005 through 2008, the average va

will remain at over the next few years. With some commerc

real estate owners struggling with decreasing occupancy ra

and values, mortgages coming due and a need to raise ca

some investors are eager to buy assets at a signicant discou

Institutional equity is coming off the sidelines to chase qual

core assets.

Future development will be contingent upon growth in ren

rates which will enable developers to get nancing for projec

This will limit the amount of speculative space added to t

Palm Beach County market within the immediate future and w

aid the recovery from current market conditions. We anticipa

better market stabilization in 2013, which should provide bet

opportunities for all lines of the commercial real estate busine



Florida Market Perspective:: MID-YEAR SouthwESt FloRIDa

LEASING ACTIVITY

Ofce

The ofce market in the Fort Myers/Naples area has be

relatively at since year-end 2010, indicating that most of t

volatility since the recession has been tempered. Stabilization

most evident in South Fort Myers, the largest submarket whe

vacancy has been declining from its peak. Despite a stea

ow of leasing activity over the past 12 months, landlords a

increasingly competitive with lower rental rates in order to wa

off high vacancy or risk of losing an existing tenant.

There remains little new product under construction, but there a

a few exceptions. Gartner Inc. is expanding to a new 120,000

ofce building under construction in south Fort Myers, vacati

60,000 SF that it has been leasing in its current location n

door. The expansion of Lee Memorial Health System, in additi

to new medical facilities such as a 220,000 SF VA clinic in Ca

Coral and a 69,500 SF, 76-bed psychiatric hospital in F

Myers, may signal a growing need for medical services.

Leasing activity has been gaining signicant traction over the past yeespecially with longer renewals, but there are few new tenants relocatfrom outside the market.

Randal Mercer, Founding Partner

Industrial

Net absorption in Lee County has remained positive since 200

indicating the transition from correction to recovery even thou

lease rates continue to decline. Collier County is still experienc

negative net absorption, though overall vacancy tends to

lower in Naples than the Fort Myers area due to fewer clusteof industrial inventory that were not as severely overbuilt ov

the past cycle. There is no signicant new construction in t

pipeline, which is prudent as some surplus inventory delivered

the past decade remains to be absorbed.

The traditional landscape of mostly construction-relat

industrial tenants in Southwest Florida is changing with r






Ofce 10,993,381 2,897,244 26.4% (116,722) 138,598 $18.85 FSG

Industrial 19,736,273 3,472,850 17.6% 153,948 0 $5.34 NNN

Retail 44,123,796 3,951,027 9.0% 35,171 69,791 $14.68 NNN




0%

5%

10%

15%

20%

25%

30%

2006 2007 2008 2009 2010 2011 YTD

$0

$5

$10

$15

$20

$25

2006 2007 2008 2009 2010 2011 YTD

(1,000,000)

(500,000)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2006 2007 2008 2009 2010 2011 YTD




such as Algenol, which processes ethanol from algae, and

VR Laboratories, a nutrition supplement company, receiving

nancial incentives from Lee County to bring jobs and attract

other R&D-related businesses to the Fort Myers area. Naples-

based Arthrex plans to expand in Collier County with a new

160,000 SF biomedical operations and manufacturing facility.

Though painfully slow, the tepid positive absorption in the marketappears to be from national tenants consolidating market share andremaining construction tenants adjusting both up and down for theirspace needs.

Stan Stouder, CCIM, Partner

Retail

Net absorption has been trending negative in Lee County as the

slow economy continues to make an impact in the form of store

and restaurant closings. Consequently, vacancy has not wavered

much from its peak, placing downward pressure on lease rates.

Collier and Charlotte Counties appear more stabilized with net

absorption trending positive, thereby stabilizing overall vacancy.

However, declining lease rates in these areas indicate there is still

excess supply of retail space that must be absorbed in order to

reach equilibrium.

There continues to be a disparity between physical occupancy

and nancial occupancy, where many tenants are occupying

space for little or no rent, but landlords have been reluctant to

force tenants to vacate for fear of not nding replacements. Theweak economy has not only taken its toll on small, local retailers,

but also national/regional retailers that have a presence in the

Fort Myers/Naples market. Some examples: Borders closing

two superstores in Southwest Florida as part of its bankruptcy

restructuring; Robb & Stuckey, a chain of upscale furniture stores,

is now bankrupt and liquidating assets; Target recently closed its

110,000 SF store in Bonita Springs after business had dropped

off since opening another store nearby at the Coconut Point mall

in Estero. On the restaurant side, Perkins recently led for Chapter

11 bankruptcy and plans to close 50 to 60 stores. It is possiblethat Southwest Florida Perkins locations may be affected. Such

closings present opportunities for new tenants with large space

needs, seeking prime locations with ample parking that were

previously unavailable. A central Fort Myers plaza previously

anchored by the defunct Circuit City has been resurrected after

New Life Worship Center leased 31,200 SF in the rst quarter.

Retail leasing activity will ultimately be driven by the housing recovebecause the housing market provides the need for goods and servithat stimulate growth. The Lee County housing market has improvslightly over the past year, driven by bargain shoppers taking advantaof pricing rolled back to 2001 values. Collier County has experiencsimilar trends but has fared better and reduced current inventory

a 12-month supply. This has encouraged large tract builders to stbuying land and will soon start building new subdivisions.

Larry Foster, CCIM, Partner/Managing Director

SALES ACTIVITY

Ofce

Lender REO sales accounted for nearly half of all ofce buildi

transactions in Southwest Florida that occurred in the rst si

months of 2011. Sale prices in Lee County during this peri

have stabilized from the rapid declines of previous years. Devolume in Collier County was minimal, and ofce values

Charlotte County have fallen since 2010. Notable sales inclu

the 27,407 SF former Colonial Bank building at the southe

corner of Daniels Parkway and I-75 in south Fort Myers. T

property was sold by the FDIC to Alico, Inc., a land manageme

company, for $2.3 million ($85 PSF). The buyer will occupy p

of the building with the reminder available for lease.

The capital markets are slowing down potential sales transactiodue to the risk associated with high-vacancy investment properties. Y

either have to write a check or youre not buying.

Randal Mercer, Founding Partner

Industrial

Lee County industrial sale prices in the rst six months of 20

have not signicantly deviated from the median in 201

However, industrial values in Collier and Charlotte Count

have declined from the previous year, though not as precariou

as before. Similar to ofce, signicant sales activity was driv

by bank-owned properties. For example, two of the larg

industrial transactions so far this year include a 25,140 SF building in Gateway, Fort Myers for $2.4 million ($95 PS

and two ex buildings totaling over 70,000 SF in East Ca

Commerce Center, Cape Coral sold for $1.6 million ($22 PS

which also included two vacant parcels for future developme

In both examples, the REO properties were constructed within t

past four years as the market was already headed in a downtu




In Punta Gorda, a fully occupied, 24,461 SF warehouse building

near Charlotte County Airport sold for $1.5 million cash ($61

PSF).

The pace of sales has slowed modestly compared to 2010s 103%increase in the number of sales versus 2009.

Stan Stouder, CCIM, Partner

Retail

Distressed sellers and REO properties continue to attract

investors seeking discounted property values. Collier County

appears the most stabilized according to sales activity in the

rst six months of 2011, though prices in Lee and Charlotte

Counties are below the median from the same period a year

ago. The largest transactions during this period indicate robust

demand for shopping centers. The 226,000 SF Collection at

Vanderbilt in Naples was purchased at a foreclosure auction for

$22 million ($97 PSF). The renovated 230,704 SF Promenades

shopping center in Port Charlotte, anchored by Winn-Dixie, sold

for $15.5 million ($67 PSF). Northpoint shopping center in Cape

Coral, formerly anchored by Circuit City, sold for $10 million

($90 PSF), and the Pine Island Marketplace in Cape Coral for

$7 million ($98 PSF), which is shadow anchored by Wal-Mart

Neighborhood Market and Kohls but not part of the sale. The

106,485 SF Golden Gate shopping center in Naples, anchored

by Winn-Dixie, sold for $6.3 million ($59 PSF). Numerous

ExxonMobil service station/convenience stores in Southwest

Florida were sold to 7-Eleven, which, in addition to expansion to

other new locations, support the chains condence in the area.

We are seeing banks and special servicers bring more assets to themarket. We have only seen the tip of the iceberg and we will not beout of this cycle for several years. Therefore we forecast property salesincreasing over the next several years.


Multihousing

On a year-over-year basis and even 2011 year-to-date, the

Southwest Florida multihousing market has continued to

improve in terms of higher trafc and occupancy, the reduction

and disappearance of concessions, and the prospects for rent

growth. As a result, Class A communities and well-located

Class B properties are beginning to increase rents and boost net

operating income. The improving fundamentals are reective of

the improving local economy, new population in-migration, and

the shift from home ownership to rental housing that is preval

nationwide. In terms of transactional activity, the market is robu

tempered only by the lack of available properties for sale. W

expect the number of sales to double in 2011 over the numb

of trades in 2010. Cap rates remain compressed; especia

for Class A assets and we are starting to see this compressi

trickle down to Class B and C assets. The development pipeli

remains halted; however, several developers are beginning

explore sites for new apartment construction.

Available, low-cost nancing combined with a favorable outlo

for fundamentals make multihousing stand out as the most attractcommercial real estate sector for investment. We expect the apartmmarket to remain on an upward trajectory through the remainder2011 and into 2012 as pricing power returns to the sector.

Jonathan Richards, Director

OUTLOOK


Stabilization will be ongoing with the Southwest Florida mar

expected to remain at throughout 2011, lagging behind t

national economic recovery but out of the freefall encounter

over the past couple of years. Increasing employment will

imperative to any meaningful impact on the local commerc

real estate market as companies shift focus from survival back

growth. In the meantime, landlords must remain competitive

order to retain tenants and sellers must have realistic expectatio

concerning property values that have not yet stabilized. T

fundamental aspects of what makes the region compelling ha

not changed, and a greater emphasis on economic divers

might be the key to emerge from the bottom stronger than befo

Both Lee and Collier Countys economic development lead

recognize that they cannot rely only on tourism and constructi

to provide jobs. They have opened their pocketbooks to provi

incentive dollars to attract new businesses to Southwest Florid

These endeavors will add to the tax base in order to continue

offer the high level of quality of life that draws people to the are



Florida Market Perspective:: MID-YEAR taMPa Bay MaRkEt



Vacancy Rates

LEASING ACTIVITY

Ofce

During the rst half of 2011, the Tampa ofce market began

demonstrate that it is ofcially on the road to recovery. Posit

absorption during the rst half of the year and increased spa

inquiries, especially in the nancial services and accounti

sectors, are both positive indicators for the second half of 201

Tenants are demonstrating a strong preference for Class

space as reected by the positive absorption in the Westsho

and Tampa CBD submarkets. Concessions remain a part

landlords strategy to attract tenants, however the amount

free rent and tenant improvement allowances being offered h

remained consistent for several quarters.

Activity levels are busy according to many ofce real est

professionals, as demand has improved in the core submarke

Government, medical, insurance, nancial and technolo

sectors are active in the Tampa area and are seeking to occu

more space. This is a shift from a couple of years ago wh

activity in the market was largely limited to professional servic

and nancial institutions. However, effective rents are still soft a

there continues to be a dichotomy between asking and effect

lease rates, differing as much as 10%. With activity increasin

we believe that the effective rents have nearly reached bottom

the Tampa Bay market.

With the current abundance of skilled labor and affordable housiTampa is back on the national radar screen for companies seekinglower operational and labor costs. Vacancy rates are expected to decliconcessions will dissipate, and rents will rise in the future. Over the n

12 months, occupiers are well advised to lock into long-term leases wrates that are currently below replacement cost.

Jack Hoskins, Senior Vice President

Industrial

Tenants have begun to test the waters to nd the best dea

however 2011 remains a transitional year for the industr

market. Landlords are no longer offering signicant concessio




Ofce 46,552,622 9,815,928 21.1% 547,180 88,000 $20.14 FSG

Industrial 140,115,377 13,738,252 9.8% 422,239 0 $5.14 NNN

Retail 78,547,589 6,392,539 8.1% 195,126 136,892 $14.63 NNN




0%

5%

10%

15%

20%

25%

2006 2007 2008 2009 2010 2011 YTD

$0

$5

$10

$15

$20

$25

2006 2007 2008 2009 2010 2011 YTD

(4,000,000)

(3,000,000)

(2,000,000)

(1,000,000)

0

1,000,0002,000,000

3,000,000

2006 2007 2008 2009 2010 2011 YTD

Retail trackingbegins 2008




on lease deals, but are still waiting to see an increase in effective

rental rates. Smaller tenants, those under 15,000 SF, have

returned to the market and are actively taking space. As a result,

the most desirable locations are lling up as they take advantage

of market conditions. A few Class B big-box spaces are seeing an

increase in activity, especially those that have been sitting on the

market for a while. However, the long term recovery will be slow

as the majority of the recent transactions are lateral movements

in the market with tenants not expanding their presence. Rental

rates appear to be leveling off, particularly in Class A buildings,

but growth is not expected until sometime in 2012.

Tampas strong demographics are expected to create demand

for continued growth in hospital and medical manufacturing

segments, among others. Manufacturing and warehouse

distribution industrial product types in Pinellas County are

expected to benet from the recovering economy and expandingindustries. Additionally, Plant City, which is a strong warehouse

distribution area, is positioned well to see increased demand.

The Tampa Bay regions industrial market reached bottom in 2010and appears poised to climb back towards recovery in 2011. After nineconsecutive quarters of negative net absorption, we have seen positiveabsorption during the rst half of 2011. Landlords are no longer offering

signicant concessions on lease deals, though they are still waiting to

see growth in rental rates. All in all, if our regions industrial marketwere to be compared to a patient, it is off life support and the pulse is

returning. Brian Rettig, SIOR, First Vice President

Retail

The emphasis for retailers in Tampa Bay now is on value. Class A

properties are highly sought locations for retailers seeking space

in the market. With little construction in the market over the past

couple of years, the supply of big-box space will dissipate quickly.

We anticipate Tampas retail market will be in short supply of

quality big-box space in 12 to 24 months. As the economy

continues to slowly improve, consumers remain focused onnecessities over luxuries. As a response, the most active national

retailers in the market continue to be the discount chains as well

as grocery stores.

Although rental rates continue to decrease, albeit at a slower

pace, the Tampa Bay retail market has seen stabilization for the

rst half of 2011. Similar to ofce, there has been a ight to

quality, especially grocery anchored neighborhood and shopping

centers. Unlike the Tampa ofce sector, however, effective re

have declined by as much as 40% in some centers compared

the 20% decline seen in the ofce sector. Even with effective re

down, concessions are continuing to rise, including free rent.

Retail leasing activity has been competitive for well anchored and

well positioned shopping centers. Demand for premium quality spaappears inated by a nite supply in the current business environme

that is showing very little creation of new inventory via ground-development.

Charlie Alloway, Associate

SALES ACTIVITY

Ofce

Cap rates have come in line with buyer and seller sentiment

more deals are completed in the market. Although core stabiliz

assets have been the appetite of buyers, we have yet to see t

oodgate of distressed and note sale activity on a local lev

Property sales are still split between Class A multi-tenant of

buildings and vacant user buildings. Many transactions to

place at the end of 2010, and we expect more activity in t

second half of 2011. Ultimately, further revitalization in the j

market must precede comprehensive ofce market developme

The Tampa MSA saw very little ofce investment sale activity in the

half of the year. Look for ofce sale activity to pick up signicantly

the second half driven by continued low interest rates and the returninstitutional investment capital.

Dale Peterson, CCIM, Senior Vice President

Industrial

The Tampa industrial market has seen little sales activity in the

half of 2011 as compared to 2010, primarily as a result of tou

market conditions. Owner-occupier sales remain the domina

force in the market. As the local economy continues toward sl

recovery, occupancy and rents will eventually stabilize. Limit

new construction will help assets become more attractive. T

waiting game continues in Tampa Bay as investors are s

looking for growth to return to the market before purchasi

industrial buildings.

The majority of investment activity is being seen by owner-occupiwith very little activity coming from the institutional buyer side. Ttrend will continue into 2012.

Rick Narkiewicz, First Vice President




Retail

Activity in retail investment picked up beginning in late 2010.

Lenders started disposing of distressed retail assets in mid-

2010, which translated into a clearing of the market for tough

properties. In addition, stabilized Class A anchored shopping

centers (especially grocery anchored) were brought to market,

a leading indicator of underwriting standards for future retail

investment. Investment activity is expected to improve by 25% to

30% in 2011, consistent with activity levels in 2004, according

to Retail Trafc Magazine.

Retail investment sales activity has increased dramatically over thelast 12 months with a combination of distressed centers and stabilizedcenters coming to market recently. The second half of 2011 should seenumerous closed sales across the spectrum of asset quality.

Mark Shellabarger, Senior Vice President

Multihousing

With limited projects in the development pipeline, continuing

improvement was evident in the rst half of 2011. We expect

low interest rates to continue in the multihousing sector and on-

hold developments will materialize as capital is more readily

available. Gradual rent and occupancy growth in the coming

months is expected due to limited new development and the trend

from home ownership back to renting. Approximately 5,705

units traded in the rst half of 2011 in Tampa. This represents

over $285 million in activity, with the average sale price per door

of $50,000 and $53 PSF.

A recovering economy, improving occupancy and rents, decreasinghome ownership, low interest rates and a minimal development pipelineare factors that are coming together to make multihousing sales aperfect storm of opportunity for apartment investors in the Tampa Bayregion. The number of multihousing sales in 2011 is expected to exceedthat of 2010, which was already up 71% compared to 2009 levels.

John Selby, CCIM, Senior Vice President

OUTLOOK

Ray Sandelli, Senior Managing Director

Last July, Federal Reserve Chairman Bernanke summarized

view of the economy as unusually uncertain. In many wa

that brief statement conveyed the message that multiple facto

were in play and nding clarity in direction was still challenginSince that time, although progress seems painfully slow, t

commercial markets continue to nd a new sense of balan

in both the leasing and sales arenas. With time, tenants ha

developed a better sense of their facility needs and see curre

conditions as favorable to strike a deal. In addition, those tena

who gapped their short terms needs with subleases 18 to 2

months ago, are seeing those terms burn off and are looki

to now commit to more traditional lease arrangements. On t

sales side, as values have started to stabilize, signicant de

and equity has become available primarily for either core assor those in distress. Prices in some cases have been driven

not necessarily based on fundamentals but by the competit

pressures to acquire a limited number of properties ma

available. The markets are certainly in a better position than

year ago despite the continued challenges to current econom

conditions. We are getting better! Perhaps we can now descr

the outlook as somewhat uncertain.



Florida Market Perspective:: MID-YEAR oRlanDo MaRkEt



Vacancy Rates

LEASING ACTIVITY

Ofce

Leasing activity through the rst half of 2011 has begun

improve throughout much of the Orlando MSA, resulting

positive absorption. Direct asking lease rates have risen slight

however, the ofce market is still very much a tenants mark

Concessions continue to be offered in addition to soften

effective lease rates. These trends are expected to contin

through the rest of 2011.

Almost all new construction opportunities remain stalled

the economic recovery takes hold. As demand for new spa

picks up, those projects with pre-leased space will start to bui

However, construction starts are expected to stay slow as

move through the second half of 2011.

Compared to a year ago, we have seen a pick-up in tenant activWe are seeing existing companies looking to expand, new companiesthe market, and in some cases, even multiple tenants competing for same space.

- Chris Sproles, Senior Vice President

Industrial

The Orlando industrial market is experiencing a gradu

recovery. After three consecutive quarters of positive absorptio

the market has realized a minimal setback in the second quart

However, tenants are taking advantage of lower rental rat

exploring longer term leases and relocating to higher qua

space. The vacancy rate has remained unchanged the past tw

quarters and is at its lowest point in 18 months.

Although the market has shown some positive signs of recove

there is still uncertainty. Crosscurrent indicators include an sl

employment growth, declining housing prices, declining g

prices, and a decline in the backlog of foreclosed propertie

With mixed signs for Orlandos economic recovery, consum

condence remains at relative low levels.




Ofce 36,938,908 7,550,171 20.4% 111,877 160,550 $19.86 FSG

Industrial 106,788,538 16,306,558 15.3% 188,455 0 $5.29 NNN

Retail 78,454,485 5,445,244 6.9% (202,725) 202,373 $17.33 NNN




0%

5%

10%

15%

20%

25%

2006 2007 2008 2009 2010 2011 YTD

$0

$5

$10

$15

$20

$25

2006 2007 2008 2009 2010 2011 YTD

(4,000,000)

(3,000,000)

(2,000,000)

(1,000,000)

0

1,000,000

2,000,000

3,000,000

4,000,000

2006 2007 2008 2009 2010 2011 YTD




Leasing activity has continued to increase over the last three quarterswith the convention services industry in the lead. Additionally, therequirement for longer lease terms, about ve to seven years, is becoming

more common place with tenants ready to increase their market share.

-Erik W. Schwetje, CCIM, First Vice President

Retail

Overall, leasing remains slow to moderate with discount retailers

and food/entertainment users leading the way in activity.

Vacancy has remained stable from mid-year 2010 and asking

rates have declined, keeping landlords competitive with offering

concessions and incentives to sign new leases.

Quality centers in prime locations continue to attract retailers,

with most of the big-box spaces vacated during the economic

downturn occupied once again. Attracting tenants continues to

be a challenge for shopping centers with small shop space still

available. Local mom and pop tenants continue to struggle due

to the continued recessed economy.

Rents seemed to have stabilized after the market correction over thelast couple of years while concessions and incentives play vital roles ingetting new deals done.

Wood Belcher, First Vice President

SALES ACTIVITY

Ofce

There is clearly more liquidity in the market but more dened

in terms of asset class and geography. Lenders and equity

investors have shown a ight to quality and remained somewhat

risk adverse. This has resulted in a scarcity premium for triple

net, core and Central Business District (CBD) assets due to lack

of deal ow. Assets in the CBD are preferred over suburban

because of inll, barriers to entry, predictable exit strategy, and

higher replacement cost. Middle market suburban ofce deals

with vacancy are difcult to get interest for from investors and

lenders. Right now, no one is pricing the vacancy and more

focus is on in-place income. Conversely, on the distressed side,

investors are buying without regard to equity or yield rates and

are primarily focused on the discount to replacement cost and

price per square foot. Financing is not a factor in these types of

deals.

Many distressed assets have not made it to the market and when theydo they are either priced too aggressively or carry so much risk that they

could only be sold at liquidation value. Many owners arent willing tothat yet.

- Ron Rogg, CCIM, Executive Vice President

Industrial

There is an increase in the number of prospective buyers in t

market, primarily owner-users, who look to occupy the majo

of the property. Some investors are looking for opportunities w

below replacement costs while other investors are looking

core, Class A, well-located industrial investment product. The

is capital for pursuing the best industrial product, but few proje

of this type have been introduced into the sales market over t

past few years. There are development projects in various stag

of planning; however, the process is stalled while the econom

recovery and capital markets are under the microscope.

There has been a signicant improvement in demand from own

occupiers interested in purchasing vacant industrial facilities for their uThe bid-ask spread between buyers and sellers has been greatly reduas property owners recognize the need to price assets appropriately.

David Murphy, MAI, SIOR, CCIM, Senior Vice President

Retail

Investment in retail product is beginning to show some life

Orlando. Through the rst half of 2011, there have be

seven shopping center sales, for a total transaction volume

$38 million. This is a slight increase from the ve centers th

sold during the rst six months of 2010, with a total volumof $36.7 million. Overall, sales prices have declined from

average of $7.3 million in 2010 to $5.4 million in 2011. T

can be attributed in part due to a much larger number of sales

distressed owners. Distressed properties have taken much long

to make it though the foreclosure process and to market th

most estimated, creating a backlog of properties below mark

value, keeping market rates deated. Also of note, only one sa

this year included a major anchor tenant. The majority of sa

came from unanchored listings.

We feel that the momentum of assets working their way into the marwill only continue to become a larger segment over the next two to thyears. Lenders of all types, from banks to life insurance companto CMBS lenders, will continue to enter the market with propertiesvarious stages of distress. This will help serve the appetite of many reestate fund managers, while keeping a lid on property values resultfrom a vast supply of assets for purchase and only so much capital




go around. Only shopping centers of the highest order will be able tocommand premium pricing in todays marketplace.

Dan Baker, CCIM, First Vice President

Multihousing

The Orlando multihousing market has shown strong signs of

recovery through the rst half of 2011. Occupancy is up about

three points to 93% from a year ago, and rents are forecast

to grow 2.6% in 2011. The next three years look increasingly

promisingrents are projected to grow 17% through 2014, by

about 5% to 6% per year. New supply continues to be historically

low, although developers are starting to look for sites for new

construction. Sales activity has increased steadily too. The $640

million in local sales in 2010 was more than two and a half times

the total transaction volume of the previous year, and 2011 sales

year-to-date are approaching about $400 million thus far.

From a recovery/activity viewpoint, Orlandos multihousing real estatesector has been the star of the Central Florida region.

Shelton Granade, Senior Vice President

OUTLOOK

Bill Moss, Senior Managing Director

At mid-year 2011, how one views the Central Florida commerc

real estate market will indicate their perspective as to a glass be

half full or half empty. And there may be justication for eith

position. For the glass is half full group, you can acknowledthat the worst of the economic downturn is behind us and

recovery is in process. Orlandos job growth leads the sta

Minimal new commercial development will allow the market

stabilize. The multihousing market has been the shining star of

product types enjoying increased occupancies, rental rates a

values. For the half empty group, the economic recovery is b

fragile and moving at a snails pace. Orlandos job growth

anemic compared to the 20042007 boom years. The invent

of distressed real estate assets continues to be a drag on bo

lenders balance sheets and the real estate markets. No ndevelopment activity is in place because there is not enou

tenant demand. It is a difcult time for many owners of of

industrial and retail properties as they deal with decreas

occupancy, rents, values and demanding lenders. So is the gl

half full or half empty? While challenging economic and r

estate market conditions still exist, well drink from the half f

glass.



Florida Market Perspective:: MID-YEAR JaCkSonvIllE MaRkEt

LEASING ACTIVITY

Ofce

Historically, Jacksonville has held close ties to the nance a

insurance industries, and as such was heavily impacted by t

most recent recession. However, as we hit mid-year 2011, t

Jacksonville ofce market has shown signs of stabilization a

steady improvement in certain submarkets and ofce prope

types. The trend for tenants to focus on short-term renew

has slowed as users gain more condence in their busine

operations and begin to consider relocations and longer-te

deals. Concessions and tenant improvement dollars rema

abundant as asking rates have stabilized.

Looking forward, we anticipate an increase in business grow

in the local area. This includes expansions of existing compan

as well as increased interest from companies outside t

local market area. In the short term, asking rates will rema

unchanged, but actual deal rates will begin to increase a

landlords will become more conservative with concessions.

With business operations stabilizing, tenants are becoming moreceptive to longer-term leases.

Joe Ayers, Senior Associate

Industrial

The rst half of 2011 has seen an increase in activity over 201

boding well for the recovery of the Jacksonville industrial mark

However, as summer approaches, the market has cooled sligh

While there are a number of large tenants seeking spac

the majority of the Jacksonville market consists of 40,000

to100,000 SF users. Activity in this mid-sized tenant range hslowed. Tenants remain cautious as renewals remain king w

both new and renewal deals averaging ve years or less.

It remains very much a tenant driven market with highest dema

and shrinking vacancy in prime submarkets. With little Class

space on the market, more tenants are considering Class B spa

as an alternative. Lease rates for Class A properties and larg






Ofce 23,850,849 5,094,580 21.4% (7,427) 0 $17.33 FSG

Industrial 97,597,839 11,122,803 11.4% 291,767 514,874 $4.03 NNN

Retail 42,112,733 4,052,701 9.6% 178,015 463,550 $14.80 NNN




0%

5%

10%

15%

20%

25%

2006 2007 2008 2009 2010 2011 YTD

$0

$5

$10

$15

$20

2006 2007 2008 2009 2010 2011 YTD

(1,000,000)

(500,000)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2006 2007 2008 2009 2010 2011 YTD




blocks of space will begin to increase due to limited availabilities.

Smaller spaces remain abundant and rates are anticipated to

remain stable but competitive.

As we move into 2012, the depressed condition of the market willcontinue to stall construction of speculative buildings until 2014, but we

will see build-to-suits to meet tenant needs that cannot be accommodatedin the current market.

Nathan Rogers. First Vice President

Retail

Consumer spending remains focused on necessities over

luxuries. As a result, service retailers remain the driving force

in the Jacksonville retail market while mid- to high-end retailers

are relatively quiet. While there are many options for big- box

retailers looking for space on the market, the national retailers

are waiting to see a signicant change in the market before

committing to expand in Jacksonville. Instead, smaller local

retailers are active in the market.

It is anticipated that the retail industry will remain stable through

the remainder of the year as unemployment remains high and

the housing industry continues to struggle. Rental rates remain

at as landlords continue to offer free rent instead of money for

tenant improvements to nancially qualify tenants. Renewals are

still occurring as well as new deals, both averaging three to ve

years.

The retail sector will continue to remain at as the economy bumps

along with no signicant growth anticipated in the near future. To

combat the slow down, we are seeing retailers reformatting their storesizes to a smaller footprint to offset the increase in internet shopping byconsumers.

Collis McGeachy, Vice President

SALES ACTIVITY

Ofce

2011 has been quiet for ofce sales. Investors and nancingare back in the Florida market, but the lack of quality product

in Jacksonville on the market is keeping transaction volume

low. Cap rates, ranging from 8.25% to 9.5%, are achievable in

stabilized assets as determined by the credit quality of the rent

roll and lack of exposure to near-term lease expirations. One

notable sale during 2011 is 245 Riverside, which sold for $18.5

million as part of a six- property, multi-market portfolio sa

It is anticipated that more attractive product for investors w

come to the market during the second half of the year, includ

distressed assets. Many landlords are facing recapitalization

their existing debt comes due in 2011 and 2012 respective

Declining property values over the last three years are resulti

in lower loan proceeds from new debt forcing the borrowers

sell the asset or attempt to restructure the existing debt with t

lender/loan servicer. Sellers still face a buffeting from stro

headwinds throughout 2011.

Distressed properties have not hit the market as anticipated as lendrestructure debt with the borrowers in order to avoid distressed sales.

Mike Harrell, CCIM, Senior Vice President

Industrial

Industrial sales have been almost non-existent in Jacksonville

2011. Total transaction volume stands at $6 millionthis is af

a quiet 2010 with $45 million recorded. Annual total transacti

volume has been declining since 2007 when this gure exceed

$300 million. Recent low sales gures are attributed not to la

of demand or product but more the quality of product broug

to the market.

Due to the lack of quality inventory being brought to the markinvestment sales of industrial product remain stalled.

Nathan Rogers, First Vice President

Retail

Interest from investors coming off the sidelines has been focus

on anchored Class A properties, but few have been brought

the market. Due to the favorable interest and cap rates, whi

have dropped by 30 to 50 basis points for Class A product, the

are often bidding wars when a property reaches the mark

With limited alternatives, we have seen increased interest

unanchored properties and Class B product. Prices for the

assets are low and may drop even further as we progress throu

2011. With more favorable credit options, low interest rates a

cap rate compression, the assets will be aggressively sought.

Increased debt liquidity through CMBS coming back into the marklow interest rates and a lack of alternative investments are all factthat will help bring transaction volume up and in turn, more aggresspricing.

Cliff Taylor, CCIM, First Vice President




Multihousing

The continued failing housing market and foreclosures have

impacted multihousing occupancy. Vacancy hit single digits,

falling from its recent peeks of 12% to 14% recorded in

2008. Concessions are disappearing and free rent is all but

gone. As a result, upward pressure is occurring as we witness

Class A product rates increase 5% to 9%. We will see similar

pressure migrate to the southeast quadrant then trickle to other

submarkets. Historically, Jacksonville has been slower to recover

than other Florida markets, but the multihousing sector has been

active in 2010 and 2011. In May, a record-breaking sale was

recorded when Atlantic Crossing at 9825 Gate Parkway North

sold for $24.1 million, or $120,500 per unit. Prices this high

have not been seen since late 2007, before prices began their

climb downward. Overall, the Jacksonville market is averaging

$70,000 per unit this year, quickly approaching the average of

$75,000 per unit in 2007.

We expect an increase in sales and a more active pipeline as land pricesand construction costs have come down.

Dhaval Patel, Senior Associate

OUTLOOK

James P. Citrano, Managing Director

The Jacksonville market is stabilizing, but is not showing signs

rapid recovery. The vacancy rate nationally for the ofce sec

is approximately 16%, but Jacksonville lags behind the nation

average with a vacancy rate of about 20%. This is not surprisisince the economic recovery in Florida and the southern U

in general, has been slow due in large part to its exposure w

the problems in the housing markets. The industrial sector is ti

closely to Jacksonvilles port, which continues to be the princip

economic driver for the area. Although the Hanjin facility

on hold at present, the proposed budget for the port shows

projected increase of 6.8% more revenue than this year, bod

well for the future. Retail is still lagging, but a rise in multihousi

sales over the last year is a positive sign and a reaction

escalating rental rates for existing apartment complexes. Thehas been very little construction announced for the balance

2011 and few expansions on the horizon. A conclusion c

be drawn that all the Jacksonville markets will be static for t

remainder of the year and that the anticipated recovery will

somewhat slower than hoped or projected.



Florida Market Perspective:: MID-YEAR all FloRIDa

2010 MIDYEAR SNAPSHOT

Market Rentable SFOverall

Vacant SFOverall

Vacancy %Net

Absorption (SF)

UnderConstruction

(SF)

Avg AskingLease Rates

(FSG)

Miami-Dade County 43,568,406 7,966,136 18.3% (99,349) 832,184 $30.03

Broward County 26,512,188 4,984,973 18.8% (22,573) 0 $25.97

Palm Beach County 23,323,226 6,071,928 26.0% 40,697 0 $28.22

Southwest Florida 10,993,381 2,897,244 26.4% (116,722) 138,598 $18.85

Tampa MSA 46,552,622 9,815,928 21.1% 547,180 88,000 $20.14

Orlando MSA 36,938,908 7,550,171 20.4% 111,877 160,550 $19.86

Jacksonville MSA 23,850,849 5,094,580 21.4% (7,427) 0 $17.33

Totals 211,739,580 44,380,960 21.0% 453,683 1,219,332 $23.46


Vacant SFOverall

Vacancy %Net

Absorption (SF)

UnderConstruction

(SF)


(NNN)

Miami-Dade County 217,996,701 16,317,581 7.5% 1,808,233 0 $4.47

Broward County 94,372,590 7,946,442 8.4% 90,255 0 $6.92

Palm Beach County 45,463,310 5,156,985 11.3% 184,704 0 $6.23

Southwest Florida 19,736,273 3,472,850 17.6% 153,948 0 $5.34

Tampa MSA 140,115,377 13,738,252 9.8% 422,239 0 $5.14

Orlando MSA 106,788,538 16,306,558 15.3% 188,455 0 $5.29

Jacksonville MSA 97,597,839 11,122,803 11.4% 291,767 514,874 $4

Totals 722,070,628 74,061,471 10.3% 3,139,601 514,874 $5.13


Vacant SFOverall

Vacancy %Net

Absorption (SF)

UnderConstruction

(SF)


(NNN)

Miami-Dade County 45,315,859 2,347,207 5.2% 111,183 540,414 $25.89

Broward County 56,536,589 5,316,413 9.4% 97,496 0 $21.58

Palm Beach County 52,134,469 4,659,928 8.9% (160,729) 0 $19.47

Southwest Florida 44,123,796 3,951,027 9.0% 35,171 69,791 $14.68Tampa MSA 78,547,589 6,392,539 8.1% 195,126 136,892 $14.63

Orlando MSA 78,454,485 5,445,244 6.9% (202,725) 202,373 $17.33

Jacksonville MSA 42,112,733 4,052,701 9.6% 178,015 463,550 $14

Totals 397,225,520 32,165,059 8.1% 253,537 1,413,020 $17.79

Florida

Ofce

Inventory

Florida

Industrial

Inventory

Florida

Retail

Inventory


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