OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
Independently Owned and Operated <ul><li>2009 ~ What We Projected </li></ul><ul><li>Projects delayed due to financing and ...
Independently Owned and Operated <ul><li>2009 ~ What We Projected </li></ul><ul><li>Asking rates flat to slightly lower ~ ...
Independently Owned and Operated <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Several projects delayed </li></ul>...
Independently Owned and Operated <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Sublease space never breached 1 MSF...
Independently Owned and Operated <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Construction pipeline emptied rapid...
Independently Owned and Operated <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Class A asking rates fell slightly ...
New and Expanding Industry <ul><li>Affiliated Computer Services </li></ul><ul><li>Cree </li></ul><ul><li>AAIPharma/Zee CRO...
*Vacancy includes sublease space Sources:  Grubb & Ellis, Highwoods Properties OFFICE
Source: Employment Security Commission of North Carolina Sustained period of job growth required for vacancy to fall notab...
Source:  Grubb & Ellis 2009 increase was an aberration. Look for decrease in 2010. OFFICE
Sources:  Grubb & Ellis, Highwoods Properties Construction now at lowest level in more than a decade. OFFICE
<ul><li>Major Construction Completions </li></ul><ul><li>Quintiles Plaza I-40/RTP ~ 252,000 SF Build-to-Suit </li></ul><ul...
<ul><li>Major Construction Completions </li></ul><ul><li>East 54 Chapel Hill ~ 113,000 SF (office portion) Speculative  ~ ...
<ul><li>Major New Vacancies </li></ul><ul><li>Lenovo 250,000 SF ~ Park Office Center ~ I-40/RTP </li></ul><ul><li>Ericsson...
<ul><li>Major New Vacancies </li></ul><ul><li>Stock Building Supply 45,000 SF ~ Brier Creek Corp. Center ~ Glenwood </li><...
<ul><li>Likely Future Vacancies </li></ul><ul><li>Sony Ericsson 205,000 SF ~ 7001 Development Drive ~ I-40/RTP </li></ul><...
<ul><li>Major Transactions </li></ul><ul><li>National Institute of Environmental Health Sciences  (sublease) 72,000 SF ~ K...
<ul><li>Major Transactions </li></ul><ul><li>Deutsche Bank 34,889 SF ~ CentreGreen IV ~ Cary </li></ul><ul><li>Social Secu...
<ul><li>2010 Forecast </li></ul><ul><li>Tenants remain in the driver’s seat </li></ul><ul><li>Vacancy up through first hal...
<ul><li>2010 Forecast </li></ul><ul><li>Increasingly aggressive concessions ~ landlords fight for share of activity </li><...
OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
<ul><li>2009 ~ What We Projected </li></ul><ul><li>Negative absorption, vacancy of at least 18 percent </li></ul><ul><li>F...
<ul><li>2009 ~ What Really Happened </li></ul><ul><li>Vacancy rose to 18.5% as absorption fell into the red </li></ul><ul>...
<ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Lack of construction kept vacancy below level of previous downtu...
Source:  Triangle Business Journal  , Grubb & Ellis INDUSTRIAL
<ul><li>Significant New Vacancies </li></ul><ul><li>Stock Building Supply 115,204 SF ~ 3222-3228 Spottswood St. and 7704-7...
<ul><li>Significant New Vacancies </li></ul><ul><li>Cardinal Health 71,000 SF ~ Chin Page Distribution Center ~  I-40/RTP ...
<ul><li>Significant Transactions </li></ul><ul><li>Viztek  (purchase) 80,000 SF ~ 2217 Hwy. 70 East ~ E. Wake </li></ul><u...
<ul><li>Significant Transactions </li></ul><ul><li>West Logistics 80,000 SF ~ Research Tri-Center ~ I-40/RTP </li></ul><ul...
<ul><li>2010 Forecast </li></ul><ul><ul><li>Flat to slightly negative absorption as sublease space rolls </li></ul></ul><u...
<ul><li>2010 Forecast </li></ul><ul><ul><li>Triangle may benefit from growing trend of decentralized distribution centers ...
OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
<ul><li>2009 ~ What We Projected </li></ul><ul><ul><li>Vacancy tops 9 percent </li></ul></ul><ul><ul><li>Sharp drop in con...
<ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Better performance than expected! </li></ul></ul><ul><ul><li>Abs...
<ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Older centers struggled with vacancy </li></ul></ul><ul><ul><li>...
<ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Retail landlords began actively seeking non-traditional tenants ...
Retailers Closing Locations RETAIL
New and Expanding Retailers RETAIL
Source:  Triangle Business Journal , Grubb & Ellis RETAIL
Source: NC Office of State Planning <ul><ul><li>Long-term demographic trends bode well for Triangle retail sector. </li></...
Source:  Triangle Business Journal  , Grubb & Ellis <ul><ul><li>Construction activity at lowest level in more than a decad...
<ul><li>2010 Forecast </li></ul><ul><ul><li>Limited construction deliveries keep a lid on absorption </li></ul></ul><ul><u...
<ul><li>2010 Forecast </li></ul><ul><ul><li>More landlords seek non-traditional tenants </li></ul></ul><ul><ul><li>Triangl...
OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
<ul><li>2009 ~ What We Projected </li></ul><ul><ul><li>Loan-to-value ratios stifle activity </li></ul></ul><ul><ul><li>Pri...
<ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Lack of CMBS loans and low loan-to-value ratios kept investors o...
<ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Lack of sales made valuations challenging </li></ul></ul><ul><ul...
Sources: Real Capital Analytics, County Revenue Offices, Grubb & Ellis INVESTMENT
<ul><li>Significant 2009 Transactions </li></ul><ul><li>Ashley Park at Brier Creek  ~ Multifamily $39 million ~ $104,278 p...
<ul><li>Significant 2009 Transactions </li></ul><ul><li>The Pointe at Chapel Hill  ~ Multifamily  $21.8 million ~ $90,833 ...
Source: Real Capital Analytics, Grubb & Ellis INVESTMENT
Dollar Volume in Millions Source: Real Capital Analytics, County Revenue Offices, Grubb & Ellis <ul><ul><li>Availability o...
<ul><li>2010 Forecast </li></ul><ul><ul><li>More realistic pricing expectations fuel more activity </li></ul></ul><ul><ul>...
<ul><li>2010 Forecast </li></ul><ul><ul><li>More distressed sales, but far short of epidemic first predicted </li></ul></u...
<ul><li>2010 Forecast </li></ul><ul><ul><li>Record amount of capital available and ready to invest in commercial real esta...
OFFICE INDUSTRIAL RETAIL INVESTMENT CONCLUSION 2010 REAL ESTATE FORECAST
<ul><li>Challenges </li></ul><ul><ul><li>Potential for jobless recovery </li></ul></ul><ul><ul><li>Commercial real estate ...
<ul><li>Challenges </li></ul><ul><ul><li>Availability of financing </li></ul></ul><ul><ul><li>Long-term changes in consume...
<ul><li>Opportunities </li></ul><ul><ul><li>Opportunities abound for tenants </li></ul></ul><ul><ul><li>Available space an...
<ul><li>Opportunities </li></ul><ul><ul><li>Investors with cash to place </li></ul></ul><ul><ul><li>Stock market volatilit...
<ul><li>A Little Perspective </li></ul><ul><ul><li>We just participated in the worst economic downturn since the Great Dep...
<ul><li>A Little Perspective </li></ul><ul><ul><li>In 1909, life expectancy in the U.S. was 47 years ~ today it’s 77.9 yea...
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2010 Grubb &amp; Ellis Triangle Real Estate Forecast

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Our company\'s annual forecast for the Triangle\'s Commercial Real Estate Industry and what truly happened in 2009.

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  • Correct on vacancy for most of the year… overall flat and Class A up sharply. Seizing up of financial markets in October changed outlook dramatically and send overall vacancy up sharply at the end of the year. Absorption was up as predicted but would have been higher had the bottom not fallen out in 4Q.
  • Correct on vacancy for most of the year… overall flat and Class A up sharply. Seizing up of financial markets in October changed outlook dramatically and send overall vacancy up sharply at the end of the year. Absorption was up as predicted but would have been higher had the bottom not fallen out in 4Q.
  • Correct on vacancy for most of the year… overall flat and Class A up sharply. Seizing up of financial markets in October changed outlook dramatically and send overall vacancy up sharply at the end of the year. Absorption was up as predicted but would have been higher had the bottom not fallen out in 4Q.
  • Correct on vacancy for most of the year… overall flat and Class A up sharply. Seizing up of financial markets in October changed outlook dramatically and send overall vacancy up sharply at the end of the year. Absorption was up as predicted but would have been higher had the bottom not fallen out in 4Q.
  • There was some good news as well!
  • Absorption will be down significantly in 2009 as space comes back to the market. Construction completions may help to keep it in positive territory.
  • After last recession, unemployment never got back to previous lows. For a time, unemployment was too low… less than 2% locally. Last two recessions have been followed by so-called “jobless recoveries”. Triangle is in better shape than U.S. and State. US = 7.2% NC = 8.7% Dur = 6.1% Ral = 6.5% North Carolina is one of the hardest hit states due to manufacturing losses, particularly in rural areas.
  • Asking rates have risen dramatically in the last three years. Started to flatten in late 2008. Will be flat to slightly lower in 2009. Concessions will arrive before reduced face rates.
  • Construction activity has surged recently, but did not reach levels witnessed prior to the last downturn.
  • Many of the year’s largest transactions occurred in new construction, so we have combined the construction/transaction slides. RBC – Triangle’s tallest building and another important step in downtown’s revitalization. Two instances of companies purchasing buildings for occupancy.
  • Many of the year’s largest transactions occurred in new construction, so we have combined the construction/transaction slides. RBC – Triangle’s tallest building and another important step in downtown’s revitalization. Two instances of companies purchasing buildings for occupancy.
  • Many of the year’s largest transactions occurred in new construction, so we have combined the construction/transaction slides. RBC – Triangle’s tallest building and another important step in downtown’s revitalization. Two instances of companies purchasing buildings for occupancy.
  • Many of the year’s largest transactions occurred in new construction, so we have combined the construction/transaction slides. RBC – Triangle’s tallest building and another important step in downtown’s revitalization. Two instances of companies purchasing buildings for occupancy.
  • Many of the year’s largest transactions occurred in new construction, so we have combined the construction/transaction slides. RBC – Triangle’s tallest building and another important step in downtown’s revitalization. Two instances of companies purchasing buildings for occupancy.
  • Many of the year’s largest transactions occurred in new construction, so we have combined the construction/transaction slides. RBC – Triangle’s tallest building and another important step in downtown’s revitalization. Two instances of companies purchasing buildings for occupancy.
  • Many of the year’s largest transactions occurred in new construction, so we have combined the construction/transaction slides. RBC – Triangle’s tallest building and another important step in downtown’s revitalization. Two instances of companies purchasing buildings for occupancy.
  • We have already seen projects delayed… Wade III, Charter Square, etc. Both unemployment and commercial real estate leasing are lagging indicators. The economy may improve in 2009, but the CRE market will not recover before sometime in 2010.
  • Absorption fell more than anticipated into negative territory. Rent rates for warehouse space rose as expected.
  • Absorption fell more than anticipated into negative territory. Rent rates for warehouse space rose as expected.
  • Market’s small size means vacancy rises and falls quickly with a handful of significant vacancies/leases.
  • Construction has already been limited for the last several years… unlike last downturn. Will help lessen the impact.
  • Construction has already been limited for the last several years… unlike last downturn. Will help lessen the impact.
  • As with other sectors, the fourth quarter changed the outlook considerably. Vacancy slight above our projected high… and will keep rising. Construction completions were minimal, but there is a lot underway. Significant increase in store closings, not just the chains we’ve all heard about, but even more so the mom &amp; pop retailers.
  • As with other sectors, the fourth quarter changed the outlook considerably. Vacancy slight above our projected high… and will keep rising. Construction completions were minimal, but there is a lot underway. Significant increase in store closings, not just the chains we’ve all heard about, but even more so the mom &amp; pop retailers.
  • As with other sectors, the fourth quarter changed the outlook considerably. Vacancy slight above our projected high… and will keep rising. Construction completions were minimal, but there is a lot underway. Significant increase in store closings, not just the chains we’ve all heard about, but even more so the mom &amp; pop retailers.
  • Not all of these have had an impact on the Triangle to date, but most have. 6 Circuit City stores and 7 Linens ‘n Things closing locally.
  • Our demographics are still strong. There ARE retailers expanding in this market, and we will continue to attract new retailers, even through the downturn.
  • Vacancy already at a record high for this market and could surge close to 10 percent by 2010. Will probably see negative absorption next year, not something we see often in this retail market.
  • Triangle’s population growth will fuel a healthy retail sector in the long-term, but there’s more space than there is demand in the short term. 2007 Pop ext. at 1.5 million.
  • Construction will drop off significantly once the current pipeline empties.
  • We are already hearing about mixed-used projects cutting back on the amount of retail space. Vacancy will rise to a new high in this market in 2009. Above 9 percent, may approach 10 percent for the first time.
  • We are already hearing about mixed-used projects cutting back on the amount of retail space. Vacancy will rise to a new high in this market in 2009. Above 9 percent, may approach 10 percent for the first time.
  • Volume was still stronger than most people probably realize, thanks to multi-family sales. Required up-front cash is more than double what it was. 35 – 45%. This is probably the biggest challenge would-be investors face. Prices have come down, but not drastically as in some markets.
  • Volume was still stronger than most people probably realize, thanks to multi-family sales. Required up-front cash is more than double what it was. 35 – 45%. This is probably the biggest challenge would-be investors face. Prices have come down, but not drastically as in some markets.
  • By historical standards, 2008 was still a strong year. 2009 will be sluggish, but we may see an uptick in activity late in the year if credit markets thaw.
  • Multi-family far out paced all other product types, followed by office.
  • Owners, particularly of retail centers, may resort to fire sales if they cannot re-finance. Some lenders may not be willing at all. Others may require significant cash. Many investors still anxious to get into or expand in the Triangle due to long-term growth prospects. Excellent opportunity for those with cash.
  • Owners, particularly of retail centers, may resort to fire sales if they cannot re-finance. Some lenders may not be willing at all. Others may require significant cash. Many investors still anxious to get into or expand in the Triangle due to long-term growth prospects. Excellent opportunity for those with cash.
  • Owners, particularly of retail centers, may resort to fire sales if they cannot re-finance. Some lenders may not be willing at all. Others may require significant cash. Many investors still anxious to get into or expand in the Triangle due to long-term growth prospects. Excellent opportunity for those with cash.
  • 2010 Grubb &amp; Ellis Triangle Real Estate Forecast

    1. 1. OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
    2. 2. OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
    3. 3. Independently Owned and Operated <ul><li>2009 ~ What We Projected </li></ul><ul><li>Projects delayed due to financing and leasing difficulties </li></ul><ul><li>Negative absorption, vacancy up significantly </li></ul><ul><li>Sublease space rises to 1.2 - 1.3 MSF </li></ul><ul><li>Tenants delay decision making and seek short-term leases </li></ul>OFFICE
    4. 4. Independently Owned and Operated <ul><li>2009 ~ What We Projected </li></ul><ul><li>Asking rates flat to slightly lower ~ no dramatic widespread reductions before 2010 </li></ul><ul><li>Little to no speculative construction breaks ground </li></ul><ul><li>No bottom in sight before 2010 </li></ul><ul><li>Rising unemployment and vacancy attract new industry to region </li></ul>OFFICE
    5. 5. Independently Owned and Operated <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Several projects delayed </li></ul><ul><li>Year began with record-breaking negative absorption </li></ul><ul><ul><li>Moderated later in year with construction deliveries </li></ul></ul><ul><li>Vacancy above 20 percent </li></ul><ul><li>Large blocks of class B space exacerbated vacancy, particularly in RTP </li></ul>OFFICE
    6. 6. Independently Owned and Operated <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Sublease space never breached 1 MSF </li></ul><ul><ul><li>Companies filing for bankruptcy ~ quickly returned space directly to landlords </li></ul></ul><ul><li>Tenants sought early renewals with rent relief and short terms </li></ul>OFFICE
    7. 7. Independently Owned and Operated <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Construction pipeline emptied rapidly </li></ul><ul><ul><li>14 buildings delivered </li></ul></ul><ul><ul><ul><li>1.26 MSF ~ 53% pre-leased </li></ul></ul></ul><ul><ul><li>5 buildings underway </li></ul></ul><ul><ul><ul><li>175,884 SF ~ 30% pre-leased </li></ul></ul></ul><ul><ul><ul><li>Lowest level in more than a decade </li></ul></ul></ul>OFFICE
    8. 8. Independently Owned and Operated <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Class A asking rates fell slightly in 1Q, then increased with new construction </li></ul><ul><ul><li>CapTrust Tower and East 54 pushed average rate to historical high ~ $22.22 </li></ul></ul><ul><li>Concessions increased, effective rents fell dramatically - net rent at pre-1985 level </li></ul><ul><li>Significant number of new companies drawn to the region </li></ul><ul><ul><li>Record $1.9 billion in new business investment </li></ul></ul>OFFICE
    9. 9. New and Expanding Industry <ul><li>Affiliated Computer Services </li></ul><ul><li>Cree </li></ul><ul><li>AAIPharma/Zee CRO* </li></ul><ul><li>IEM* </li></ul><ul><li>Loparex* </li></ul><ul><li>Garmin </li></ul><ul><li>Research in Motion </li></ul><ul><li>Deutsche Bank </li></ul><ul><li>Credit Suisse </li></ul><ul><li>EMC Corp. </li></ul><ul><li>ABB* </li></ul>*New Corporate Headquarters OFFICE
    10. 10. *Vacancy includes sublease space Sources: Grubb & Ellis, Highwoods Properties OFFICE
    11. 11. Source: Employment Security Commission of North Carolina Sustained period of job growth required for vacancy to fall notably – lagging indicator. OFFICE
    12. 12. Source: Grubb & Ellis 2009 increase was an aberration. Look for decrease in 2010. OFFICE
    13. 13. Sources: Grubb & Ellis, Highwoods Properties Construction now at lowest level in more than a decade. OFFICE
    14. 14. <ul><li>Major Construction Completions </li></ul><ul><li>Quintiles Plaza I-40/RTP ~ 252,000 SF Build-to-Suit </li></ul><ul><li>Genworth Financial Center Six Forks Road ~ 129,347 SF Build-to-Suit </li></ul><ul><li>RDU Center III I-40/RTP ~ 114,518 SF Speculative ~ 0% Leased ~ LEED Certified </li></ul>OFFICE
    15. 15. <ul><li>Major Construction Completions </li></ul><ul><li>East 54 Chapel Hill ~ 113,000 SF (office portion) Speculative ~ 35% Leased ~ Mixed-Use </li></ul><ul><li>CapTrust Tower at North Hills Six Forks Road ~ 302,446 SF (office portion) Speculative ~ 38% Leased ~ Mixed-Use </li></ul><ul><li>3600 Glenwood (renovation) Glenwood Avenue ~ 78,000 SF Former Poyner & Spruill Bldg. ~ 0% Leased </li></ul>OFFICE
    16. 16. <ul><li>Major New Vacancies </li></ul><ul><li>Lenovo 250,000 SF ~ Park Office Center ~ I-40/RTP </li></ul><ul><li>Ericsson 262,000 SF ~ 8001 Development Drive ~ I-40/RTP </li></ul><ul><li>IBM 25,000 SF ~ Regency Park~ Cary </li></ul><ul><li>Qimonda 100,000 SF ~ CentreGreen Office Park ~ Cary </li></ul>OFFICE
    17. 17. <ul><li>Major New Vacancies </li></ul><ul><li>Stock Building Supply 45,000 SF ~ Brier Creek Corp. Center ~ Glenwood </li></ul><ul><li>Quintiles 60,000 SF ~ Riverbirch ~ I-40/RTP </li></ul><ul><li>Siemens Medical (sublease) 124,300 SF ~ 200 Lucent Lane ~ Cary </li></ul>OFFICE
    18. 18. <ul><li>Likely Future Vacancies </li></ul><ul><li>Sony Ericsson 205,000 SF ~ 7001 Development Drive ~ I-40/RTP </li></ul><ul><li>Nortel 1.4 Million SF ~ Hwy. 54 ~ I-40/RTP </li></ul>OFFICE
    19. 19. <ul><li>Major Transactions </li></ul><ul><li>National Institute of Environmental Health Sciences (sublease) 72,000 SF ~ Keystone Office Park ~ I-40/RTP </li></ul><ul><li>Law Offices of James Scott Farrin 50,000 SF ~ Diamond View II ~ Durham </li></ul><ul><li>Burt’s Bees (sublease) 71,000 SF ~ American Tobacco ~ Durham </li></ul>OFFICE
    20. 20. <ul><li>Major Transactions </li></ul><ul><li>Deutsche Bank 34,889 SF ~ CentreGreen IV ~ Cary </li></ul><ul><li>Social Security Administration 43,831 SF ~ Progress Center ~ I-40/RTP </li></ul><ul><li>Syngenta Biotechnology (purchase) 131,000 SF ~ 9 Davis Drive ~ I-40/RTP </li></ul>OFFICE
    21. 21. <ul><li>2010 Forecast </li></ul><ul><li>Tenants remain in the driver’s seat </li></ul><ul><li>Vacancy up through first half of 2010, then begins slow downward trend </li></ul><ul><li>Shadow space and off-market opportunities slow vacancy decline </li></ul><ul><li>Absorption flat to slightly negative </li></ul><ul><li>More widespread lowering of asking rates </li></ul>OFFICE
    22. 22. <ul><li>2010 Forecast </li></ul><ul><li>Increasingly aggressive concessions ~ landlords fight for share of activity </li></ul><ul><li>Tenants seek longer terms to lock in rent savings </li></ul><ul><li>Free rent still more negotiable than tenant improvements </li></ul><ul><li>Few speculative projects before 2012 </li></ul>OFFICE
    23. 23. OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
    24. 24. <ul><li>2009 ~ What We Projected </li></ul><ul><li>Negative absorption, vacancy of at least 18 percent </li></ul><ul><li>Flex space competes with glut of Class B office </li></ul><ul><li>Rent rates flat to slightly lower ~ increasing concessions </li></ul><ul><li>Little to no speculative development </li></ul>INDUSTRIAL
    25. 25. <ul><li>2009 ~ What Really Happened </li></ul><ul><li>Vacancy rose to 18.5% as absorption fell into the red </li></ul><ul><li>Flex competed with multi-story office </li></ul><ul><li>Concessions increased but asking rates relatively flat </li></ul>INDUSTRIAL
    26. 26. <ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Lack of construction kept vacancy below level of previous downturn </li></ul></ul><ul><ul><li>Sublease space significant issue </li></ul></ul><ul><ul><ul><li>1.5 MSF – increases effective vacancy to 22% </li></ul></ul></ul><ul><ul><li>RTP direct vacancy below 10% </li></ul></ul><ul><ul><ul><li>But 1 MSF sublease - effective vacancy 16.4% </li></ul></ul></ul><ul><ul><li>Capital Boulevard hardest hit with vacancy above 21% </li></ul></ul>INDUSTRIAL
    27. 27. Source: Triangle Business Journal , Grubb & Ellis INDUSTRIAL
    28. 28. <ul><li>Significant New Vacancies </li></ul><ul><li>Stock Building Supply 115,204 SF ~ 3222-3228 Spottswood St. and 7704-7708 Burwell St. ~ Capital Blvd. </li></ul><ul><li>The Body Shop 257,000 SF ~ Riverplace Commercial Center ~ Capital Blvd. </li></ul><ul><li>Delta Products 225,000 SF ~ 2728 Capital Blvd. ~ Capital Blvd. </li></ul>INDUSTRIAL
    29. 29. <ul><li>Significant New Vacancies </li></ul><ul><li>Cardinal Health 71,000 SF ~ Chin Page Distribution Center ~ I-40/RTP </li></ul><ul><li>Silverline Windows (sublease) 422,000 SF ~ Research Tri-Center ~ I-40/RTP </li></ul><ul><li>Stock Building Supply 71,500 SF ~ Beltline Center ~ E. Wake </li></ul><ul><li>Implus Footcare 85,592 SF ~ Globe Center ~ I-40/RTP </li></ul>INDUSTRIAL
    30. 30. <ul><li>Significant Transactions </li></ul><ul><li>Viztek (purchase) 80,000 SF ~ 2217 Hwy. 70 East ~ E. Wake </li></ul><ul><li>LC Industries (purchase) 70,000 SF ~ 3211 Miami Blvd. ~ I-40/RTP </li></ul><ul><li>WakeMed Health and Hospitals 50,000 SF ~ 900 Management Way ~ E. Wake </li></ul><ul><li>City of Raleigh (purchase) 115,204 SF ~ Former Stock Buildings ~ Capital Blvd. </li></ul>INDUSTRIAL
    31. 31. <ul><li>Significant Transactions </li></ul><ul><li>West Logistics 80,000 SF ~ Research Tri-Center ~ I-40/RTP </li></ul><ul><li>EMC (purchase) 450,000 SF ~ Essex Center ~ I-40/RTP 315,000 SF occupied by Sanmina SCI </li></ul><ul><li>Implus Footcare (build-to-suit) 259,800 SF ~ 2001 T.W. Alexander ~ I-40/RTP </li></ul><ul><li>Syngenta 95,000 SF ~ Keystone Tech Park ~ I-40/RTP </li></ul>INDUSTRIAL
    32. 32. <ul><li>2010 Forecast </li></ul><ul><ul><li>Flat to slightly negative absorption as sublease space rolls </li></ul></ul><ul><ul><li>Vacancy reaches 20 percent before improving in late 2010 </li></ul></ul><ul><ul><li>Flex/garden office faces stiff competition from traditional office </li></ul></ul>INDUSTRIAL
    33. 33. <ul><li>2010 Forecast </li></ul><ul><ul><li>Triangle may benefit from growing trend of decentralized distribution centers </li></ul></ul><ul><ul><li>Ongoing limited construction aids in quickly reducing vacancy as activity improves </li></ul></ul><ul><ul><li>With inventories low and manufacturing rebounding, sector poised to recover ahead of office and retail </li></ul></ul>INDUSTRIAL
    34. 34. OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
    35. 35. <ul><li>2009 ~ What We Projected </li></ul><ul><ul><li>Vacancy tops 9 percent </li></ul></ul><ul><ul><li>Sharp drop in construction by 3Q09 </li></ul></ul><ul><ul><li>Sharp increase in small store closings </li></ul></ul><ul><ul><li>Projects delayed or retooled with less retail </li></ul></ul><ul><ul><li>Despite downturn, region remains target for new and expanding retailers </li></ul></ul>RETAIL
    36. 36. <ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Better performance than expected! </li></ul></ul><ul><ul><li>Absorption strong </li></ul></ul><ul><ul><ul><li>New construction deliveries </li></ul></ul></ul><ul><ul><ul><li>Speedy backfilling of large vacancies </li></ul></ul></ul><ul><ul><li>Vacancy peaked at 8.7%, fell to 8.3% in 4Q </li></ul></ul><ul><ul><li>Significant downward pressure on rents </li></ul></ul>RETAIL
    37. 37. <ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Older centers struggled with vacancy </li></ul></ul><ul><ul><li>Increased closings by small, local operators </li></ul></ul><ul><ul><ul><li>But some seized opportunity to start new ventures </li></ul></ul></ul><ul><ul><li>By year-end, lowest level of construction underway in more than a decade </li></ul></ul><ul><ul><li>Some retail projects delayed, some mixed-use revised with less retail </li></ul></ul>RETAIL
    38. 38. <ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Retail landlords began actively seeking non-traditional tenants ~ locally and nationally </li></ul></ul><ul><ul><li>Triangle remained top target for new and expanding retailers </li></ul></ul><ul><ul><li>Increasing number of retailers chose Triangle for first N.C. locations </li></ul></ul>RETAIL
    39. 39. Retailers Closing Locations RETAIL
    40. 40. New and Expanding Retailers RETAIL
    41. 41. Source: Triangle Business Journal , Grubb & Ellis RETAIL
    42. 42. Source: NC Office of State Planning <ul><ul><li>Long-term demographic trends bode well for Triangle retail sector. </li></ul></ul>RETAIL
    43. 43. Source: Triangle Business Journal , Grubb & Ellis <ul><ul><li>Construction activity at lowest level in more than a decade. </li></ul></ul>RETAIL
    44. 44. <ul><li>2010 Forecast </li></ul><ul><ul><li>Limited construction deliveries keep a lid on absorption </li></ul></ul><ul><ul><li>Vacancy flat to slightly lower </li></ul></ul><ul><ul><li>Persistent high unemployment, long-term changes in consumer behavior challenge retailers beyond 2010 </li></ul></ul>RETAIL
    45. 45. <ul><li>2010 Forecast </li></ul><ul><ul><li>More landlords seek non-traditional tenants </li></ul></ul><ul><ul><li>Triangle remains top target for new and expanding retailers </li></ul></ul><ul><ul><li>Landlords remain aggressive, depending on location </li></ul></ul><ul><ul><li>Tenants can expect far fewer concessions in region’s top centers </li></ul></ul>RETAIL
    46. 46. OFFICE INDUSTRIAL RETAIL INVESTMENT 2010 REAL ESTATE FORECAST
    47. 47. <ul><li>2009 ~ What We Projected </li></ul><ul><ul><li>Loan-to-value ratios stifle activity </li></ul></ul><ul><ul><li>Prices fall further as leasing fundamentals weaken </li></ul></ul><ul><ul><li>Sluggish activity through most of 2009 ~ back to historical norms in 2010 </li></ul></ul><ul><ul><li>Opportunities for able investors to increase Triangle presence </li></ul></ul>INVESTMENT
    48. 48. <ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Lack of CMBS loans and low loan-to-value ratios kept investors on sidelines </li></ul></ul><ul><ul><li>Local activity down by 69% since 2008, by 83% since 2007 </li></ul></ul><ul><ul><li>Volume increased slowly throughout year </li></ul></ul><ul><ul><li>Multifamily only sector with notable volume </li></ul></ul><ul><ul><ul><li>Financing through Fannie Mae and Freddie Mac </li></ul></ul></ul>INVESTMENT
    49. 49. <ul><li>2009 ~ What Really Happened </li></ul><ul><ul><li>Lack of sales made valuations challenging </li></ul></ul><ul><ul><li>Some fire sales, but not widespread </li></ul></ul><ul><ul><li>Prices fell, but gap persisted between seller and buyer expectations </li></ul></ul><ul><ul><li>Cap rates up across all product types </li></ul></ul><ul><ul><li>Many able buyers patient versus investing while markets in turmoil </li></ul></ul>INVESTMENT
    50. 50. Sources: Real Capital Analytics, County Revenue Offices, Grubb & Ellis INVESTMENT
    51. 51. <ul><li>Significant 2009 Transactions </li></ul><ul><li>Ashley Park at Brier Creek ~ Multifamily $39 million ~ $104,278 per unit </li></ul><ul><li>Legends at Preston ~ Multifamily $29.5 million ~ $77,225 per unit </li></ul><ul><li>Shoppes of Kildaire ~ Retail $22.9 million ~ $154 per SF </li></ul><ul><li>Olde Towne @ Carpenter Village ~ Multifamily $28.1 million ~ $85,152 per unit </li></ul>INVESTMENT
    52. 52. <ul><li>Significant 2009 Transactions </li></ul><ul><li>The Pointe at Chapel Hill ~ Multifamily $21.8 million ~ $90,833 per unit </li></ul><ul><li>Legends at Preston ~ Multifamily $29.5 million ~ $77,225 per unit </li></ul><ul><li>Essex Center ~ Industrial $22.6 million ~ $50.28 per SF </li></ul><ul><li>9 Davis Drive ~ Office $10.7 million ~ $81.52 per SF </li></ul>INVESTMENT
    53. 53. Source: Real Capital Analytics, Grubb & Ellis INVESTMENT
    54. 54. Dollar Volume in Millions Source: Real Capital Analytics, County Revenue Offices, Grubb & Ellis <ul><ul><li>Availability of Financing via Fannie and Freddie. </li></ul></ul>INVESTMENT
    55. 55. <ul><li>2010 Forecast </li></ul><ul><ul><li>More realistic pricing expectations fuel more activity </li></ul></ul><ul><ul><li>Underwriting more positive in late 2010, early 2011 as leasing improves </li></ul></ul><ul><ul><li>Multifamily continues to dominate activity with office a distant second </li></ul></ul><ul><ul><li>Retail properties make up bulk of distressed assets </li></ul></ul>INVESTMENT
    56. 56. <ul><li>2010 Forecast </li></ul><ul><ul><li>More distressed sales, but far short of epidemic first predicted </li></ul></ul><ul><ul><li>More off-market sales as buyers hunt for deals </li></ul></ul><ul><ul><li>More trophy and core-property sales ~ demand among REITs and Funds </li></ul></ul><ul><ul><li>Banks continue “blend and extend” campaigns for select clients </li></ul></ul>INVESTMENT
    57. 57. <ul><li>2010 Forecast </li></ul><ul><ul><li>Record amount of capital available and ready to invest in commercial real estate </li></ul></ul><ul><ul><ul><li>Leads to price stabilization as logjam clears </li></ul></ul></ul><ul><ul><ul><li>More out-of-market investors look to Triangle, attracted by market diversity </li></ul></ul></ul>INVESTMENT
    58. 58. OFFICE INDUSTRIAL RETAIL INVESTMENT CONCLUSION 2010 REAL ESTATE FORECAST
    59. 59. <ul><li>Challenges </li></ul><ul><ul><li>Potential for jobless recovery </li></ul></ul><ul><ul><li>Commercial real estate lagging indicator ~ Vacancy will not peak before mid 2010 </li></ul></ul><ul><ul><li>Landlords challenged to achieve rents that meet pro-formas </li></ul></ul><ul><ul><li>Limited funds for tenant improvements </li></ul></ul><ul><ul><li>“ Shadow” and “dinosaur” space </li></ul></ul>CONCLUSION
    60. 60. <ul><li>Challenges </li></ul><ul><ul><li>Availability of financing </li></ul></ul><ul><ul><li>Long-term changes in consumer behavior </li></ul></ul><ul><ul><li>Long-term inflationary risk </li></ul></ul><ul><ul><li>Higher taxes, real or hidden </li></ul></ul><ul><ul><li>Pending legislation, mid-term elections ~ hesitancy in business decisions </li></ul></ul><ul><ul><li>State and local budget shortfalls </li></ul></ul>CONCLUSION
    61. 61. <ul><li>Opportunities </li></ul><ul><ul><li>Opportunities abound for tenants </li></ul></ul><ul><ul><li>Available space and workforce attracting new businesses and investment </li></ul></ul><ul><ul><li>Local economy more diversified </li></ul></ul><ul><ul><li>Robust population growth </li></ul></ul><ul><ul><li>Triangle still exceptional value </li></ul></ul><ul><ul><li>Lower construction costs </li></ul></ul>CONCLUSION
    62. 62. <ul><li>Opportunities </li></ul><ul><ul><li>Investors with cash to place </li></ul></ul><ul><ul><li>Stock market volatility makes real estate more attractive </li></ul></ul><ul><ul><li>Great time for companies to gain market share </li></ul></ul><ul><ul><li>Downturns spur entrepreneurship </li></ul></ul><ul><ul><ul><li>More than half the companies on 2009 Fortune 500 list began during a recession </li></ul></ul></ul>CONCLUSION
    63. 63. <ul><li>A Little Perspective </li></ul><ul><ul><li>We just participated in the worst economic downturn since the Great Depression . . . and we’re all here, discussing the future </li></ul></ul><ul><ul><li>Triangle remains healthiest metro in N.C. and one of healthiest in U.S. </li></ul></ul><ul><ul><ul><li>8.4% unemployment beats 12.4%... see Charlotte </li></ul></ul></ul><ul><ul><ul><li>2009 was record-breaking year for new business investment in the region </li></ul></ul></ul>CONCLUSION
    64. 64. <ul><li>A Little Perspective </li></ul><ul><ul><li>In 1909, life expectancy in the U.S. was 47 years ~ today it’s 77.9 years </li></ul></ul><ul><ul><li>Engle’s Law ~ The standard of living of a person or country can be measured by the percentage of income spent on food </li></ul></ul><ul><ul><ul><li>9.6 percent for U.S. in 2008 </li></ul></ul></ul><ul><ul><ul><li>Lowest level ever recorded ~ half the level witnessed in the 1950s </li></ul></ul></ul><ul><ul><li>Progress is hard to stop! </li></ul></ul>CONCLUSION

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