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ADA and CANYON COUNTY SUBMARKETS

OFFICE Q1 REVIEW

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Overview

First quarter of 2010 began to show signs that the officemarket might reach stabilization sometime this year. Thenumber of sales and lease transactions increased as vacancystabilized for the first time since mid year 2007. Vacancy atyear end 2009 was at 18.0% and declined slightly to 17.9%.A few notable transactions during the first quarter were,Scentsy leasing 67,000 square feet at the Portico develop-ment off Eagle and I-84, Intermountain Gas purchasing the31,000 square feet Plaza Bonito building at El DoradoBusiness Park, and Treasure Valley Community Collegeleasing 39,000 square feet in Caldwell. Banks began takingback property in mid to late 2009 as the first wave of bank-owned office property hit the market; we expect the trendto continue throughout the remainder of the year asproperty owners struggle to meet loan covenants.

Asking rates continued to decline as landlords sought to filltheir properties. Valley wide, average full service asking ratesdropped to $16.67 in the first quarter, compared to $17.21at the end of 2009. Closed lease rents have remainedrelatively flat as compared to end of year 2009. In

What can we expect for the office market throughout theremainder of 2010? Shadow vacancy, that is, space that isnot being used by tenants but not also marketed forsublease, should hit the market throughout the year as firmswith excess space seek to cut costs by subleasing and/ordownsizing at lease renewal. Longer term leases will makea minor comeback as some companies become moreconfident in their businesses amidst the economicrecovery and take advantage of a still soft real estatemarket. Bank owned properties and aggressive pricing willbring buyers into the market as owning becomes in somecases cheaper than leasing. Opportunistic investors beganto acquire "value-add" properties in 2009 and will likely beeven more active in 2010. We expect more leases torenew in 2010 than in any year in recent memory, due tothe number of short-term leases signed over the past 18months.

local Class A properties, the closed lease rents averaged$17.95 full service, while an overall average on all buildingclasses averaged $15.25 full service.

RETAIL Q1 REVIEW

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Overview

The first quarter of 2010 saw some positive signs in theTreasure Valley retail sector. Dick's Sporting Goods leasedthe former Joe's space and Hobby Lobby completed their45,000 square foot bui lding at Eagle and Ustick'sCentrePoint Marketplace. Pre-existing retail tenants'demands for rent relief have slowed and some national andregional tenants have reopened expansion plans in Boise.

Despite some positive signs, we are still in the midst of ahighly distressed marketplace. Vacancy has increased from13.1% at year-end 2009 to 13.5%. One of the largest build-ings to come available was the 134,000 square foot Sam'sClub located off I-84 in Nampa. These are very challengingtimes for landlords as tenants continue to be frighteninglyaggressive when it comes to deal points such as free rent,term, tenant improvement allowances and low rates withfixed options. Landlords face a number of obstacles whenit comes to closing transactions, which has led to anincrease in the number of bank-owned properties through-out our region.

development/good locations and are $8.00-$12.00 forsecond generation space. The overall average for all NNNdeals done was at $14.14 NNN. In an effort to attracttenants, landlords have begun foregoing NNN structureddeals and are offering full service leases. While not ideal foran owner, it has become an attractive option for tenants.Tenants remain in the cat bird seat and there is no short-age of landlords looking to meet their demands.

For the second quarter of 2010, look for activity to slightlyincrease as we enter our busiest season and for the land-scape to ever-so-slowly begin to stabilize. Developmentwill be minimal to nonexistent. Colliers does not foreseelandlords gaining any leverage over tenants in the short term.There is no question that the second quarter of 2010 willbe another challenging time for retail commercial realestate, however our hope is that the worst is close tobeing over.

Lease rates have dropped significantly from $14.47 NNNat 2009 year-end, to $14.07 NNN. First quarter actualtransaction rents range from $19.00-$24.00 in newer

INDUSTRIAL Q1 REVIEW

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Overview

The pervading question continues to be…."Have we turnedthe corner?"

Some would say that we have. Leasing activity seems tohave picked up slightly, vacancy declined to 11.3% from 12%(a first downward swing since mid 2006), and interest fromout-of-state companies is on-going. While all good news,there are those who realize we have a long way to go.Without job creation and a substantive rebound in thehousing sector, the industrial market will remain mired inthe condition it's been in for some time.

Without a doubt, tenants still maintain the "driver's seat"in seeking and negotiating on industrial space. Free rent,short lease terms, and the ability to receive tenant improve

On a positive note, and speaking to the aforementionedreduction in Industrial vacancy, there were a few encourag-ing transactions in the first Quarter of 2010. Scentsy, thegrowing candle manufacturer from Meridian, leased 48,000±square feet in West Boise. Great American Appetizers took31,000± square feet in Nampa; Micron was able to effect atransaction with Origin that will occupy one of their largeNampa facilities (254,259 quare feet). Speculative construc-tion in Q1 was non-existent. Industrial vacancy will remainflat as the market continues to stabilize.

ment dollars al l contribute to the continuation ofthis"Tenant's Market." Lease rates for industrial space arein the mid-to-high $0.30's NNN range.

COLLIERS IDAHO

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