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Denver Industrial Market Real Estate Stats

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Q1 2011 Denver Industrial Market Real Estate Stats

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Denver Industrial Market Real Estate Stats

  1. 1. The CoStarIndustrial Report F I R S T Q U A R T E R 2 0 1 1 Denver Industrial Market
  2. 2. FIRST QUARTER 2011 – DENVER Denver Industrial Market Table of Contents Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Terms & Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C Market Highlights & Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CoStar Markets & Submarkets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Employment & Tenant Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Employment & Unemployment Analysis Tenant Profiles Inventory & Development Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Construction Activity Map Inventory & Development Analysis Select Top Under Construction Properties Select Top Deliveries Figures at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Figures at a Glance by Building Type & Market Figures at a Glance by Building Type & Submarket Historical Figures at a Glance Leasing Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Leasing Activity Map Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Sales Activity Analysis Select Top Sales Transactions Select Same Building Sales Select Land Sales Analysis of Individual CoStar Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Aurora Market Boulder Market Broomfield Market Central Market Clear Creek County Market East I-70/Montbello Market Elbert County Market Fort Collins/Loveland Market Glendale Market Longmont Market North Central Market North Denver Market Northeast Denver Market Northwest Denver Market Park County Market Parker/Castle Rock Market South Central Market Southeast Denver Market Southwest Denver Market Weld County Market West Denver Market©2011 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT A
  3. 3. DENVER – FIRST QUARTER 2011 Denver Industrial Market Methodology The CoStar Industrial Report calculates Industrial statistics using CoStar Groups base of existing, under construction and under renovation Industrial buildings in each given metropolitan area. All Industrial building types are included, including warehouse, flex / research & development, distribution, manufacturing, industrial showroom, and service buildings, in both single-tenant and multi-tenant buildings, including owner-occupied buildings. CoStar Groups national database includes approximately 71.7 billion square feet of coverage in 3 million properties. All rental rates reported in the CoStar Industrial Report are calculated using the quoted rental rate for each property. For information on subscribing to CoStar’s other products and services, please contact us at 1-877-7COSTAR, or visit our web site at www.costar.com © Copyright 2010 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided ‘as is’ and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc. 1331 L ST NW • Washington, DC USA 20005 • (800) 204-5960 • www.costar.com • NASDAQ: CSGPB THE COSTAR INDUSTRIAL REPORT ©2011 COSTAR GROUP, INC.
  4. 4. FIRST QUARTER 2011 – DENVER Denver Industrial Market Terms & Definitions Availability Rate: The ratio of available space to total rentable Deliveries: Buildings that complete construction during a specified space, calculated by dividing the total available square feet by the period of time. In order for space to be considered delivered, a total rentable square feet. certificate of occupancy must have been issued for the property. Available Space: The total amount of space that is currently Delivery Date: The date a building completes construction and being marketed as available for lease in a given time period. It receives a certificate of occupancy. includes any space that is available, regardless of whether the Developer: The company, entity or individual that transforms raw space is vacant, occupied, available for sublease, or available at land to improved property by use of labor, capital and entrepre- a future date. neurial efforts. Build-to-Suit: A term describing a particular property, developed Direct Space: Space that is being offered for lease directly from specifically for a certain tenant to occupy, with structural features, the landlord or owner of a building, as opposed to space being systems, or improvement work designed specifically for the needs offered in a building by another tenant (or broker of a tenant) of that tenant. A build-to-suit can be leased or owned by the ten- trying to sublet a space that has already been leased. ant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied Buyer: The individual, group, company, or entity that has pur- by tenants. It does not include space in buildings that are either chased a commercial real estate asset. planned, under construction or under renovation. Cap Rate: Short for capitalization rate. The Cap Rate is a calcula- Flex Building: A type of building designed to be versatile, which tion that reflects the relationship between one year’s net operating may be used in combination with office (corporate headquarters), income and the current market value of a particular property. research and development, quasi-retail sales, and including but The Cap Rate is calculated by dividing the annual net operating not limited to industrial, warehouse, and distribution uses. A typi- income by the sales price (or asking sales price). cal flex building will be one or two stories with at least half of the CBD: Abbreviation for Central Business District. (See also: rentable area being used as office space, have ceiling heights of 16 Central Business District) feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area Full Service Rental Rate: Rental rates that include all operating within a metropolitan statistical area (MSA) describing the level expenses such as utilities, electricity, janitorial services, taxes and of real estate development found there. The CBD is characterized insurance. by a high density, well organized core within the largest city of a Gross Absorption: The total change in occupied space over a given MSA. given period of time, counting space that is occupied but not Class A: A classification used to describe buildings that generally space that is vacated by tenants. Gross absorption differs from qualify as extremely desirable investment-grade properties and leasing Activity, which is the sum of all space leased over a certain command the highest rents or sale prices compared to other period of time. Unless otherwise noted Gross Absorption includes buildings in the same market. Such buildings are well located direct and sublease space. and provide efficient tenant layouts as well as high quality, and in Growth in Inventory: The change in size of the existing square some buildings, one-of-a-kind floor plans. They can be an archi- footage in a given area over a given period of time, generally due tectural or historical landmark designed by prominent architects. to the construction of new buildings. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best Industrial Building: A type of building adapted for such uses as quality materials and workmanship in their trim and interior fit- the assemblage, processing, and/or manufacturing of products tings. They are generally the most attractive and eagerly sought from raw materials or fabricated parts. Additional uses include by investors willing to pay a premium for quality. warehousing, distribution, and maintenance facilities. The pri- mary purpose of the space is for storing, producing, assembling, Class B: A classification used to describe buildings that generally or distributing product. qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such Landlord Rep: (Landlord Representative) In a typical lease trans- buildings offer utilitarian space without special attractions, and action between an owner/landlord and tenant, the broker that have ordinary design, if new or fairly new; good to excellent represents the interests of the owner/landlord is referred to as the design if an older non-landmark building. These buildings typical- Landlord Rep. ly have average to good maintenance, management and tenants. Leased Space: All the space that has a financial lease obligation. They are less appealing to tenants than Class A properties, and It includes all leased space, regardless of whether the space is may be deficient in a number of respects including floor plans, currently occupied by a tenant. Leased space also includes space condition and facilities. They lack prestige and must depend being offered for sublease. chiefly on a lower price to attract tenants and investors. Leasing Activity: The volume of square footage that is commit- Class C: A classification used to describe buildings that gener- ted to and signed under a lease obligation for a specific building ally qualify as no-frills, older buildings that offer basic space and or market in a given period of time. It includes direct leases, command lower rents or sale prices compared to other buildings subleases and renewals of existing leases. It also includes any in the same market. Such buildings typically have below-average pre-leasing activity in planned, under construction, or under maintenance and management, and could have mixed or low renovation buildings. tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly Market: Geographic boundaries that serve to delineate core areas on a lower price to attract tenants and investors. that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building- Construction Starts: Buildings that began construction during a type specific, and are non-overlapping contiguous geographic specific period of time. (See also: Deliveries) designations having a cumulative sum that matches the boundar- Contiguous Blocks of Space: Space within a building that is, or is ies of the entire Region (See also: Region). Markets can be further able to be joined together into a single contiguous space. subdivided into Submarkets. (See also: Submarkets)©2011 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT C
  5. 5. DENVER – FIRST QUARTER 2011 Denver Industrial Market Multi-Tenant: Buildings that house more than one tenant at a Seller: The individual, group, company, or entity that sells a par- given time. Usually, multi-tenant buildings were designed and ticular commercial real estate asset. built to accommodate many different floor plans and designs for SF: Abbreviation for Square Feet. different tenant needs. (See also: Tenancy). Single-Tenant: Buildings that are occupied, or intended to be Net Absorption: The net change in occupied space over a given occupied by a single tenant. (See also: Build-to-suit and Tenancy) period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with Net Rental Rate: A rental rate that excludes certain expenses that the lease obligation. Sublease space is sometimes referred to as a tenant could incur in occupying office space. Such expenses sublet space. are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other Submarkets: Specific geographic boundaries that serve to delin- related costs. eate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive New Space: Sometimes called first generation space, refers to set, or peer group. Submarkets are building type specific (office, space that has never been occupied and/or leased by a tenant. industrial, retail, etc.), with distinct boundaries dependent on Occupied Space: Space that is physically occupied by a tenant. different factors relevant to each building type. Submarkets are It does not include leased space that is not currently occupied non-overlapping, contiguous geographic designations having a by a tenant. cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufactur- Suburban: The Suburban and Central Business District (CBD) ing, warehousing, or other uses. Office buildings may sometimes designations refer to a particular geographic area within a metro- have other associated uses within part of the building, i.e., retail politan statistical area (MSA). Suburban is defined as including all sales, financial, or restaurant, usually on the ground floor. office inventory not located in the CBD. (See also: CBD) Owner: The company, entity, or individual that holds title on a Tenancy: A term used to indicate whether or not a building is given building or property. occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Planned/Proposed: The status of a building that has been announced for future development but not yet started Tenant Rep: Tenant Rep stands for Tenant Representative. In a construction. typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to Preleased Space: The amount of space in a building that has been as a Tenant Rep. leased prior to its construction completion date, or certificate of occupancy date. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is Price/SF: Calculated by dividing the price of a building (either vacant or occupied. sales price or asking sales price) by the Rentable Building Area (RBA). Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is Property Manager: The company and/or person responsible for considered to be under construction after it has begun construc- the day-to-day operations of a building, such as cleaning, trash tion and until it receives a certificate of occupancy. removal, etc. The property manager also makes sure that the vari- ous systems within the building, such as the elevators, HVAC, and Vacancy Rate: A measurement expressed as a percentage of the electrical systems, are functioning properly. total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally Quoted Rental Rate: The asking rate per square foot for a par- is not included in vacancy calculations. ticular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by Vacant Space: Space that is not currently occupied by a tenant, tenants following the negotiation of all terms and conditions in regardless of any lease obligation that may be on the space. a specific lease. Vacant space could be space that is either available or not avail- RBA: Abbreviation for Rentable Building Area. (See also: able. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered Rentable Building Area) vacant space. Likewise, space that has been leased but not yet Region: Core areas containing a large population nucleus, that occupied because of finish work being done, would also be con- together with adjacent communities have a high degree of eco- sidered vacant space. nomic and social integration. Regions are further divided into Weighted Average Rental Rate: Rental rates that are calculated by market areas, called Markets. (See also: Markets) factoring in, or weighting, the square footage associated with each Relet Space: Sometimes called second generation or direct space, particular rental rate. This has the effect of causing rental rates refers to existing space that has previously been occupied by on larger spaces to affect the average more than that of smaller another tenant. spaces. The weighted average rental rate is calculated by taking Rentable Building Area: (RBA) The total square footage of a the ratio of the square footage associated with the rental rate on building that can be occupied by, or assigned to a tenant for the each individual available space to the square footage associated purpose of determining a tenant’s rental obligation. Generally with rental rates on all available spaces, multiplying the rental rate RBA includes a percentage of common areas including all hall- by that ratio, and then adding together all the resulting numbers. ways, main lobbies, bathrooms, and telephone closets. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. Sales Price: The total dollar amount paid for a particular property at a particular point in time. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through what- Sales Volume: The sum of sales prices for a given group of build- ever time period is being studied. ings in a given time period.D THE COSTAR INDUSTRIAL REPORT ©2011 COSTAR GROUP, INC.
  6. 6. FIRST QUARTER 2011 – DENVER Denver Industrial Market OVERVIEW Denver’s Vacancy Decreases to 7.7% Net Absorption Positive 128,256 SF in the QuarterT he Denver Industrial market ended the first quarter 2011 122,696 in the third quarter 2010, and positive 58,406 in the with a vacancy rate of 7.7%. The vacancy rate was down second quarter 2010. over the previous quarter, with net absorption totaling The Warehouse building market recorded net absorption ofpositive 128,256 square feet in the first quarter. Vacant sublease positive 136,828 square feet in the first quarter 2011 compared tospace decreased in the quarter, ending the quarter at 809,476 positive 238,291 square feet in the fourth quarter 2010, positivesquare feet. Rental rates ended the first quarter at $5.91, a 194,583 in the third quarter 2010, and positive 1,738,621 in thedecrease over the previous quarter. A total of two buildings second quarter 2010.delivered to the market in the quarter totaling 55,113 square feet, Vacancywith 103,269 square feet still under construction at the end of The Industrial vacancy rate in the Denver market areathe quarter. decreased to 7.7% at the end of the first quarter 2011. TheAbsorption vacancy rate was 7.8% at the end of the fourth quarter 2010, Net absorption for the overall Denver Industrial market 7.9% at the end of the third quarter 2010, and 8.0% at the endwas positive 128,256 square feet in the first quarter 2011. That of the second quarter 2010.compares to positive 302,913 square feet in the fourth quarter Flex projects reported a vacancy rate of 14.5% at the end2010, positive 317,279 square feet in the third quarter 2010, and of the first quarter 2011, 14.4% at the end of the fourth quarterpositive 1,797,027 square feet in the second quarter 2010. 2010, 14.6% at the end of the third quarter 2010, and 14.8% at Tenants moving out of large blocks of space in 2011 include: the end of the second quarter 2010.PROMOTECH moving out of (130,182) square feet at 1775 Warehouse projects reported a vacancy rate of 6.4% at theCherry St, Metalwest Specialty Products moving out of (96,000) end of the first quarter 2011, 6.5% at the end of fourth quartersquare feet at 9101 E 89th Ave, and Gambro Health Care moving 2010, 6.6% at the end of the third quarter 2010, and 6.7% at theout of (50,000) square feet at 16200 Table Mountain Pky. end of the second quarter 2010. Tenants moving into large blocks of space in 2011 include: Largest Lease SigningsPrime Source Building Products moving into 129,362 square The largest lease signings occurring in 2011 included:feet at 12950 E 38th Ave, Fresh Pack Produce moving into the 67,220-square-foot lease signed by Solar Solutions and97,000 square feet at Colorado Trade Center Dry, and Mohawk Distribution, LLC at Warehouse Central in the Central market;Carpet Distribution moving into 52,882 square feet at Majestic the 38,863-square-foot deal signed by Denco LLC & BakkedCommercenter - Bldg 3. LLC at 5155 E 46th Ave in the East I-70/Montbello market; and The Flex building market recorded net absorption of nega- the 31,035-square-foot lease signed by Stag at Leyden II in thetive (8,572) square feet in the first quarter 2011, compared to East I-70/Montbello market.positive 64,622 square feet in the fourth quarter 2010, positive Vacancy Rates by Building Type 1999-2011 Flex Warehouse Total Market 20% 18% 16% 14% Vacancy Rate 12% 10% 8% 6% 4% 2% 0% 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q Source: CoStar Property®©2011 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 1 Absorption & Deliveries U.S. Vacancy Comparison
  7. 7. DENVER – FIRST QUARTER 2011 Denver Industrial Market OVERVIEW Sublease Vacancy ing 6,719 square feet completed in the third quarter 2010, and The amount of vacant sublease space in the Denver market 764,176 square feet in two buildings completed in the second decreased to 809,476 square feet by the end of the first quarter quarter 2010. 2011, from 839,374 square feet at the end of the fourth quarter There were 103,269 square feet of Industrial space under 2010. There was 943,000 square feet vacant at the end of the construction at the end of the first quarter 2011. third quarter 2010 and 1,041,706 square feet at the end of the Some of the notable 2011 deliveries include: 3761 Eureka second quarter 2010. Way, a 32,332-square-foot facility that delivered in first quarter Denver’s Flex projects reported vacant sublease space of 2011 and is now 100% occupied, and 835 SE Frontage Rd, a 167,746 square feet at the end of first quarter 2011, up from the 22,781-square-foot building that delivered in first quarter 2011 93,133 square feet reported at the end of the fourth quarter 2010. and is now 100% occupied. There were 139,085 square feet of sublease space vacant at the The largest projects underway at the end of first quarter end of the third quarter 2010, and 151,912 square feet at the end 2011 were Cummins Rocky Mountain Master Rebuild Center, of the second quarter 2010. a 78,000-square-foot building with 100% of its space pre-leased, Warehouse projects reported decreased vacant sublease and 4894 101st Ct, a 32,127-square-foot facility that is 100% space from the fourth quarter 2010 to the first quarter 2011. pre-leased. Sublease vacancy went from 746,241 square feet to 641,730 Inventory square feet during that time. There was 803,915 square feet at Total Industrial inventory in the Denver market area999-2011 the end of the third quarter 2010, and 889,794 square feet at the amounted to 278,456,257 square feet in 9,361 buildings as of end of the second quarter 2010. Warehouse Total Market the end of the first quarter 2011. The Flex sector consisted of Rental Rates 45,377,383 square feet in 1,649 projects. The Warehouse sector The average quoted asking rental rate for available Industrial consisted of 233,078,874 square feet in 7,712 buildings. Within space was $5.91 per square foot per year at the end of the first the Industrial market there were 1,248 owner-occupied buildings quarter 2011 in the Denver market area. This represented a 0.5% accounting for 60,859,192 square feet of Industrial space. decrease in quoted rental rates from the end of the fourth quarter Sales Activity 2010, when rents were reported at $5.94 per square foot. Tallying industrial building sales of 15,000 square feet or The average quoted rate within the Flex sector was $8.97 larger, Denver industrial sales figures fell during the fourth quarter per square foot at the end of the first quarter 2011, while 2010 in terms of dollar volume compared to the third quarter of Warehouse rates stood at $4.89. At the end of the fourth quarter 2010. 2010, Flex rates were $9.21 per square foot, and Warehouse rates In the fourth quarter, 30 industrial transactions closed with a were $4.84. total volume of $87,098,949. The 30 buildings totaled 1,881,378 Deliveries and Construction square feet and the average price per square foot equated to004 2005 2005 During the first quarter2008 2009 two buildings totaling 2006 2006 2007 2007 2008 2011, 2009 2010 2010 $46.30 per square foot. That compares to 33 transactions total-4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 55,113 square feet were completed in the Denver market area. ing $87,265,400 in the third quarter. The total square footage was This compares to one building totaling 13,300 square feet that 1,537,081 for an average price per square foot of $56.77. were completed in the fourth quarter 2010, one building total- Total year-to-date industrial building sales activity in 2010 U.S. Vacancy Comparison is down compared to the previous year. In the twelve months Past 7 Quarters of 2010, the market saw 100 industrial sales transactions with a total volume of $257,509,388. The price per square foot has aver- Denver United States 12.0% aged $50.43 this year. In the twelve months of 2009, the market posted 73 transactions with a total volume of $308,658,500. The 10.0% price per square foot averaged $55.40. Cap rates have been higher in 2010, averaging 9.52%, 8.0% compared to the twelve months of last year when they averaged Vacancy Rate 9.20%. 6.0% One of the largest transactions that has occurred within the 4.0% last four quarters in the Denver market is the sale of TIAA CREF in Broomfield. This 92,800-square-foot industrial building sold 2.0% for $12,855,000, or $138.52 per square foot. The property sold on 8/26/2010, at a 7.34% cap rate. 0.0% 2009 3q 2009 4q 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q Source: CoStar Property• Reports compiled by: Ethan Reed, CoStar Sr. Research Manager. 2 THE COSTAR INDUSTRIAL REPORT ©2011 COSTAR GROUP, INC.
  8. 8. FIRST QUARTER 2011 – DENVER Denver Industrial Market MARKETS CoStar Markets & SubmarketsIn analyzing metropolitan areas in the U.S., CoStar has developed geographic designations to help group properties together, calledRegions, Markets and Submarkets. Regions are the equivalent of metropolitan areas, or areas containing a large population nucleus,that together with adjacent communities have a high degree of economic and social integration. Regions are then divided intoMarkets, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attractingand keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core groupof buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Markets Submarkets Aurora Ind Aurora Ind Boulder Ind Boulder County Ind Boulder Ind Broomfield Ind Broomfield County Ind Central Ind Lower Central Ind Mid Central Ind Upper Central Ind Clear Creek County Ind Clear Creek County Ind East I-70/Montbello Ind Cent E I-70/Montbello Ind East I-70/270 Ind Quebec St Ind SW DIA/Pena Blvd Ind Elbert County Ind Elbert County Ind Fort Collins/Loveland Ind Fort Collins/Loveland Ind Glendale Ind Glendale Ind Longmont Ind Longmont Ind North Central Ind Lower North Central Ind Upper North Central Ind North Denver Ind North Denver Ind Northeast Denver Ind Commerce City Ind DIA Ind Northwest Denver Ind Northwest Denver Ind Park County Ind Park County Ind Parker/Castle Rock Ind Parker/Castle Rock Ind South Central Ind Lower South Central Ind Mid South Central Ind Upper South Central Ind Southeast Denver Ind Arapahoe Rd Ind Centennial Ind Denver Tech Center Ind East Hampden Ind Greenwood Village Ind Highlands Ranch Ind Inverness Ind Meridian Ind Southeast C-470 Ind Southwest Denver Ind Lakewood Ind Southwest C-470 Ind Weld County Ind Weld County Ind West Denver Ind West Denver Ind©2011 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 3
  9. 9. DENVER – FIRST QUARTER 2011 Denver Industrial Market EMPLOYMENT AND TENANT Total Employment by Industry Total Employment Growth Percent of Total Employment by Industry Total Number of Jobs Added Per Year Natural Resources & Denver U.S. Average 5% Mining 4.0% 0% 21% Construction 3.0% Manufacturing 16% 2.0% Trade, Transportation & 4% Utilities Information 1.0% Percent Growth Financial Activities 0.0% 8% 4% Professional & Business -1.0% Services Education & Health -2.0% Services Leisure & Hospitality -3.0% 11% Other Services -4.0% 18% Government -5.0% 13% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: Department of Labor, Bureau of Labor Statistics Source: Department of Labor, Bureau of Labor Statistics Total Employment Growth Industrial* Employment Growth Cumulative Growth in Jobs Over the Past 5 Years Number of Industrial* Jobs Added Per Year Employment Inventory Denver U.S. Average Market Growth Growth Difference 3.0% Atlanta -8.40% 4.00% -12.40% 2.0% Chicago -4.60% 4.10% -8.70% 1.0% 0.0% Dallas/Ft Worth 1.10% 7.10% -6.00% Percent Growth -1.0% Denver -4.70% 3.30% -8.00% -2.0% Detroit -11.00% 0.80% -11.80% -3.0% Houston 2.90% 6.80% -3.90% -4.0% Inland Empire (California) -10.60% 14.20% -24.80% -5.0% Los Angeles -7.70% 1.30% -9.00% -6.0% -7.0% Northern New Jersey -5.60% 2.30% -7.90% -8.0% Pittsburgh -2.80% 1.90% -4.70% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: Department of Labor, Bureau of Labor Statistics Source: Department of Labor, Bureau of Labor Statistics. * Industrial employment is defined as jobs in the Manufacturing, and Trade, Transportation & Utilities industries Historical Unemployment Rates Denver U.S. Average 12.0% 10.0% Percent Unemployment 8.0% 6.0% 4.0% 2.0% 0.0% 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3qSource: Department of Labor, Bureau of Labor Statistics4 THE COSTAR INDUSTRIAL REPORT ©2011 COSTAR GROUP, INC.
  10. 10. FIRST QUARTER 2011 – DENVER Denver Industrial Market EMPLOYMENT AND TENANTFlex Tenants by Size Range Warehouse Tenants by Size RangeBased on Total Number of Tenants Based on Total Number of Tenants 75,000 SF & Up 1.9% 75,000 SF & Up 5.9% 50,000-74,999 SF 1.9% 50,000-74,999 SF 5.2% 25,000-49,999 SF 5.1% 25,000-49,999 SF 11.4% 10,000-24,999 SF 15.7% 10,000-24,999 SF 24.8% 5,000-9,999 SF 18.0% 5,000-9,999 SF 14.3% 2,500-4,999 SF 23.5% 2,500-4,999 SF 14.5% Up to 2,499 SF 33.9% Up to 2,499 SF 24.0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 0% 5% 10% 15% 20% 25% 30% Percentage of Tenants Percentage of Tenants Source: CoStar Tenant® Source: CoStar Tenant®Flex Tenants by Lease Expiration Warehouse Lease ExpirationBased on Total Square Footage of Tenants Based on Total Square Footage of Tenants 2017 4.6% 2017 2.4% 2016 6.6% 2016 7.0% 2015 14.3% 2015 11.4% 2014 9.2% 2014 11.6% 2013 20.6% 2013 14.8% 2012 17.7% 2012 19.2% 0% 5% 10% 15% 20% 25% 0% 5% 10% 15% 20% 25% Percentage of Tenants Percentage of Tenants©2011 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 5
  11. 11. DENVER – FIRST QUARTER 2011 Denver Industrial Market INVENTORY & DEVELOPMENT Construction Highlights in Select CoStar Markets Color Coded by Under Construction Square Footage as a Percentage of Existing Inventory ���� ������ ��� ��� ���������� ���� � �� ����� ������ ��� �� ��������� �� �� ���� ���������������� ��� ��� ���������� ���� � �� ����� ������ ��� � �� ��������� �� ���� �� ������� ��� ��� ���������� ��� �� ����� ������ ��� �� ��������� �� �� �� ������������ ��� ��� ���������� ��� �� ����� ������ ��� �� ��������� �� �� ���� �������������� ��� ��� ���������� ��� �� ����� ������ ��� �� ��������� �� �� �� �� ����� ������� ��� ��� ���������� ��� �� ����� ������ ���� � �� ��������� �� �� �� ������������ ������ ���� ���� ����� ����� �� ����� ����� �� ����� ����� �� ����� ���� ����� Source: CoStar Property®6 THE COSTAR INDUSTRIAL REPORT ©2011 COSTAR GROUP, INC.
  12. 12. FIRST QUARTER 2011 – DENVER Denver Industrial Market INVENTORY & DEVELOPMENT Historical Deliveries 1982 - 2011 Deliveries Average Delivered SF 10.0 8.9 8.7 9.0 8.1 7.8 7.7 8.0 7.5 7.3 7.3 7.0 6.2 Millions of SF 6.0 5.4 5.4 5.0 5.1 5.0 4.5 4.2 3.9 3.8 4.0 3.5 3.5 3.5 2.9 2.9 3.0 2.4 2.0 1.7 1.7 2.0 0.9 0.7 0.8 1.0 0.1 0.0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: CoStar Property® * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction RBA Under Construction Inventory Average Bldg Size Market # Bldgs Total RBA Preleased SF Preleased % All Existing U/C Northeast Denver Ind 1 78,000 78,000 100.0% 26,252 78,000 South Central Ind 1 10,875 0 0.0% 17,101 10,875 Fort Collins/Loveland Ind 1 8,130 8,130 100.0% 23,918 8,130 West Denver Ind 1 6,264 6,264 100.0% 37,829 6,264 Weld County Ind 0 0 0 0.0% 28,400 0 Northwest Denver Ind 0 0 0 0.0% 28,640 0 Aurora Ind 0 0 0 0.0% 23,821 0 Glendale Ind 0 0 0 0.0% 18,897 0 North Central Ind 0 0 0 0.0% 25,203 0 Southeast Denver Ind 0 0 0 0.0% 32,606 0 All Other 0 0 0 0.0% 35,451 0 Totals 4 103,269 92,394 89.5% 29,746 25,817 Source: CoStar Property® Recent Deliveries Future Deliveries Leased & Un-Leased SF in Deliveries Since 2007 Preleased & Un-Leased SF in Properties Scheduled to Deliver Leased Un-Leased Preleased Un-Leased 4.5 100 4.0 90 3.5 80 70 3.0 T Thousands of SF Millions of SF 60 2.5 50 2.0 40 1.5 30 1.0 20 0.5 10 0.0 0 2007 2008 2009 2010 2011 2011 2q 2012 1q Source: CoStar Property® Source: CoStar Property®©2011 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 7
  13. 13. DENVER – FIRST QUARTER 2011 Denver Industrial Market INVENTORY & DEVELOPMENT Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction Construction Starts Deliveries 1.6 1.5 1.5 1.4 1.3 1.2 1.0 Millions of SF 0.8 0.7 0.8 0.8 0.6 0.6 0.3 0.4 0.3 0.2 0.2 0.2 0.2 0.1 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q Source: CoStar Property® Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 2 55,113 55,113 100.0% $0.00 55,113 0 50,000 SF - 99,999 SF 0 0 0 0.0% $0.00 0 0 100,000 SF - 249,999 SF 0 0 0 0.0% $0.00 0 0 250,000 SF - 499,999 SF 0 0 0 0.0% $0.00 0 0 >= 500,000 SF 0 0 0 0.0% $0.00 0 0 Source: CoStar Property® Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi-Tenant Use Based on Total RBA 2011 Deliveries Currently Under Construction By Building Type By Tenancy Type 0% 11% 16% 39% 84% 61% 100% 89% Flex Warehouse Multi Single Multi Single Multi Single Source: CoStar Property® Source: CoStar Property®8 THE COSTAR INDUSTRIAL REPORT ©2011 COSTAR GROUP, INC.
  14. 14. FIRST QUARTER 2011 – DENVER Denver Industrial Market INVENTORY & DEVELOPMENT������������������������������ ����������������������������������� ��������������� ���� ������������������ ����������� ����������������������������� ����������� ��������������������������������� ����� ������ ������ ���������� ���� ����� ������ ������������� ��� ���������� ���� ��������������������������������� ������������� ��� ������������ ������������������ ���������������������������������� ������������ ������������������������� ������������ ������������������ ���������� ������������ ����������������������� ����������� ��� ����������� ��� � ����������������������������������������� ����������������������������������� �������������������������������������������� ���� ������������� ���� ����������������� ����������� ���������������������������� ����������� ������������������������������ ����������� ������������������������������� ������ ����� ������ ����� ������ ����� ������ ����������� ���� ����������� �� ����������� ���� ������������� ��� ������������� ���������� ������������� ��� ��������������������������������� ��������������������������������� ��������������������������������� ������������ ������������������ ������������ ������������������ ������������ ������������������� ������������ ������������������������� ������������ ������������������������������ ������������ �������������������������� ����������� ��� ��� ����������� ��� � ����������� ��� � ����� ������������������� ���� ������������� ����������� ��������������������������������� ����������� ����������������������������� ������ ����� ����� ����� ����� ����������� ���� ����������� ���� ������������� ��� ������������� ��� ���������������������������������� ���������������������������������� ������������ ������������������� ������������ ������������������� ������������ ����������������������������� ������������ ������������������������ ����������� ��� ����������� ��� � �������������������������©2011 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 9
  15. 15. DENVER – FIRST QUARTER 2011 Denver Industrial Market FIGURES AT A GLANCE Flex Market Statistics First Quarter 2011 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Aurora Ind 52 1,685,292 220,953 220,953 13.1% 6,184 0 0 $7.44 Boulder Ind 174 6,220,028 626,149 635,296 10.2% 62,515 0 0 $10.49 Broomfield Ind 34 1,046,510 142,143 164,037 15.7% 50,127 0 0 $8.17 Central Ind 41 410,050 34,634 34,634 8.4% 3,018 0 0 $9.18 Clear Creek County Ind 1 5,920 0 0 0.0% 0 0 0 $0.00 East I-70/Montbello Ind 83 2,084,937 546,951 546,951 26.2% 5,754 0 0 $7.97 Elbert County Ind 0 0 0 0 0.0% 0 0 0 $0.00 Fort Collins/Loveland Ind 180 4,479,878 461,198 487,954 10.9% (14,017) 0 0 $7.65 Glendale Ind 51 1,044,787 127,490 127,490 12.2% 6,810 0 0 $9.13 Longmont Ind 64 2,895,916 354,882 354,882 12.3% (33,334) 0 0 $7.87 North Central Ind 50 1,039,777 68,671 68,671 6.6% (7,922) 0 0 $19.85 North Denver Ind 29 1,736,486 284,003 284,003 16.4% (3,934) 0 0 $10.18 Northeast Denver Ind 34 519,290 136,274 136,274 26.2% 9,075 0 0 $7.53 Northwest Denver Ind 161 4,119,159 628,447 707,964 17.2% (91,728) 0 0 $9.56 Park County Ind 0 0 0 0 0.0% 0 0 0 $0.00 Parker/Castle Rock Ind 15 213,281 22,854 22,854 10.7% 2,046 0 0 $8.65 South Central Ind 65 750,286 70,572 70,572 9.4% (911) 0 0 $8.23 Southeast Denver Ind 264 7,809,682 1,212,799 1,233,031 15.8% 59,970 0 0 $9.02 Southwest Denver Ind 142 4,024,753 454,345 454,345 11.3% (100,492) 0 0 $9.24 Weld County Ind 86 2,058,569 531,330 531,330 25.8% 25,636 32,332 0 $6.64 West Denver Ind 123 3,232,782 489,418 499,618 15.5% 12,631 0 0 $8.36 Totals 1,649 45,377,383 6,413,113 6,580,859 14.5% (8,572) 32,332 0 $8.97Source: CoStar Property® Warehouse Market Statistics First Quarter 2011 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Aurora Ind 51 768,262 17,055 17,055 2.2% (3,065) 0 0 $7.60 Boulder Ind 286 7,556,438 335,694 341,635 4.5% (543) 0 0 $6.82 Broomfield Ind 115 3,331,967 353,064 353,064 10.6% 2,580 0 0 $4.87 Central Ind 614 13,362,738 378,231 378,231 2.8% (10,016) 0 0 $4.95 Clear Creek County Ind 4 70,041 0 0 0.0% 0 0 0 $0.00 East I-70/Montbello Ind 1,289 69,418,507 5,421,993 5,950,521 8.6% 111,384 0 0 $3.80 Elbert County Ind 6 48,459 4,337 4,337 8.9% (2,169) 0 0 $6.89 Fort Collins/Loveland Ind 476 11,210,550 1,310,300 1,310,300 11.7% 7,774 22,781 8,130 $6.11 Glendale Ind 102 1,846,451 253,049 253,049 13.7% 1,674 0 0 $5.60 Longmont Ind 151 3,415,524 363,087 363,087 10.6% 78,453 0 0 $5.05 North Central Ind 857 21,819,420 1,019,320 1,019,320 4.7% 26,489 0 0 $4.40 North Denver Ind 209 7,339,719 446,546 461,398 6.3% 11,468 0 0 $5.66 Northeast Denver Ind 615 16,518,125 993,295 1,047,693 6.3% 891 0 78,000 $4.98 Northwest Denver Ind 493 14,611,619 921,368 929,912 6.4% (65,122) 0 0 $5.77 Park County Ind 7 20,132 0 0 0.0% 0 0 0 $6.33 Parker/Castle Rock Ind 87 981,925 31,013 31,013 3.2% 18,550 0 0 $8.91 South Central Ind 900 15,752,091 653,413 653,413 4.1% (22,813) 0 10,875 $5.33 Southeast Denver Ind 212 7,710,970 522,240 530,888 6.9% (3,897) 0 0 $6.88 Southwest Denver Ind 342 6,735,546 231,491 231,491 3.4% (2,045) 0 0 $5.72 Weld County Ind 545 15,861,993 661,289 661,289 4.2% 48,882 0 0 $5.77 West Denver Ind 351 14,698,397 413,412 434,231 3.0% (61,647) 0 6,264 $6.20 Totals 7,712 233,078,874 14,330,197 14,971,927 6.4% 136,828 22,781 103,269 $4.89Source: CoStar Property®10 THE COSTAR INDUSTRIAL REPORT ©2011 COSTAR GROUP, INC.

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