Commercial Real Estate Market Overview Ethan Reed Sr. Research Manager CoStar Group

Commercial Real Estate Overview

Market fundamentals National perspective Denver & Colorado Market

Economic Trends Job Growth

Economic Threats

Economic Danger Zones for 2011 and beyond

Retail Sales

Market Fundamentals

Traditional market cycle

Expansion Expansion

Market Unbalance (Hyper-supply)

Contraction

Excess space absorbed

Market Fundamentals

Four Quadrant Market Cycle

Cap Rates

Replacement Costs

Tenant Demand

Construction Activity

Rent Prices

Sale Prices

Square Feet

Construction SF

Market Fundamentals

Four Quadrant Market Cycle

Cap Rates

Replacement Costs

Construction Activity

Rent Prices

Sale Prices

Square Feet

Construction SF

Tenants Demand

Increases

Market Fundamentals

Four Quadrant Market Cycle

Cap Rates

Replacement Costs

Construction Activity

Rent Prices

Sale Prices

Square Feet

Construction SF

Tenants Demand

Increases

Market Fundamentals

Measurements of Market Health/Trends Rents

Office Rents Full Service Gross Industrial Rents Triple Net Retail Rents Triple Net

Vacancy rates physically vacant and available Availability rates available regardless of occupancy Absorption change in occupancy Leasing activity total volume of leases signed Construction activity under construction Sales price average price per square foot Sales volume total square feet or dollars sold Cap rates overall cap rate

National Trends

Re-valuation of risk Banks Investors Developers Tenants

A downturn like no other Lack of hyper-supply Conformity of demand movement Lack of shadow space Conformity among product types and indicators Capital structure revolution

National Trends - Office

National Trends - Office

National Trends - Office

National Trends - Office

National Trends - Office

National Trends - Office

National Trends - Office

National Trends - Office

National Trends - Office

National Trends - Office

National Trends - Industrial

National Trends - Industrial

National Trends - Industrial

National Trends - Industrial

National Trends - Industrial

National Trends - Industrial

National Trends - Industrial

National Trends - Retail

National Trends - Retail

National Trends - Retail

National Trends - Retail

National Trends - Retail

National Trends - Retail

National Trends - Distress

Colorado Market

Colorado Market

How does Colorado compare?

Denver-Boulder-Fort Collins

80% of all CRE in Colorado

Considered one of the best investment opportunities in

the country over the next 5 years

Denver Market - Office

Denver Market - Office

Rent Trends Average Office Rent - $19.81 Since 4Q08, rents declined 7.3% Concessions increasing

Free months rent TI packages Moving allowances Lease buyouts

Vacancy Trends Average Office Vacancy 13.9% Absorption 4Q08 to 3Q09 (982,3741) SF Absorption Since 3Q09 3,004,706 SF Sublet SF Decreased from 1,541,899 SF (1Q10) to 1,425,632 SF (4Q10)

Denver Market Industrial

Denver Market - Industrial

Rent Trends Average Industrial Rent - $5.92 Since 4Q08, rents declined 4.5% Concessions increasing

Free months rent TI packages Moving allowances Lease buyouts

Vacancy Trends Average Industrial Vacancy 7.2% Absorption 4Q08 to 3Q09 (1,142,122) SF Absorption since 3Q09 3,665,380 SF Sublet SF Decreased from 876,805 SF (1Q10) to 639,640 SF (4Q10)

Denver Market - Retail

Denver Market - Retail

Rent Trends Average Retail Rent - $14.54 Since 4Q08, rents declined 13% Concessions increasing

Free months rent TI packages Moving allowances Lease buyouts

Vacancy Trends Average Retail Vacancy 7.9% Absorption 4Q08 to 3Q09 (769,815) SF Absorption since 3Q09 2,524,404 SF Power Center Vacancy 7.5% Neighborhood Center Vacancy 10.5% General Retail Bldg Vacancy 6.0%

Denver Market Multi-Family

Denver Market Multi-Family

Denver Market Current Development

Renaissance Hotel (hospitality) 500,000 sf

IKEA (retail) 400,000 sf

Briargate Lifetime Fitness (retail) 226,077 sf

Alta Aspen Grove (multi-family) 200,000 sf

Fitzsimons Village 100 (office) 168,029 sf

Marriott Springhill Suites (hospitality) 156,604 sf

South Boulder Community Center 154,974 sf

Belmar Target (retail) 140,000 sf

Belmar Nodrstrom Rack/Best Buy 130,000 sf

Colorado Market Grand Junction

Office stats: - Vacancy: 8.2% - Average Rental Rates: $13.81/psf

Industrial stats: - Vacancy: 12.1% - Average Rental Rates: $5.62/psf

Retail stats: - Vacancy: 6.0% - Average Rental Rates: $10.81

Colorado Market

- Pinon Ridge

-Southgate Towne Center

-The Shops at La Bella Piazza

The Shoppes @ Delta 60,000SF retail Family Dollar 8,000SF retail

One Steamboat Springs 80 unit resort

3 Indicators to Watch For Signs of Return of Demand

JOBS! JOBS! JOBS!

What future trends can we expect?

Polycentric metropolitan movement Ft. Collins/Loveland/Greeley Broomfield Castle Rock DIA Colorado Springs Pueblo Summit County

Mixed Use & Flex Green trends will become a larger factor Shorter lease terms + much higher transaction volume = busy brokers! Queue Theory demand will outpace supply, but shorter pipeline

The recovery will be as different as the

downturn