The third quarter of 2010 was the first in which the training wheels were

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1 Las Vegas COMMERCIAL REPORTS 3 R D Q U A R T E R 2 1 L A S V E G A S N E V A D A PUBLISHED NOVEMBER 21 OFFICE ACTUALS FORECAST VACANCY ABSORPTION COMPLETIONS RENTS REPORT ON PAGE 2 APARTMENT ACTUALS FORECAST OCCUPANCY RENTS POPULATION EMPLOYMENT REPORT ON PAGE 4 RETAIL ACTUALS FORECAST VACANCY Economic Highlights The third quarter of 21 was the first in which the training wheels were removed from the nation s economic bicycle. Without the homebuyer tax credit, little stimulus dollars remaining from the American Recovery and Reinvestment Act, and most funds from the government s Troubled Asset Relief Program (TARP) returned with an overall cost estimated at $5 billion (less than one percent of the gross domestic product), the third quarter was a test of whether the economy could sustain itself in the wake of the Great Recession. The United States gross domestic product (GDP) or total economic output for the second quarter of 21 (latest available data) increased at an annual rate of 1.7 percent, down considerably from the 3.7 percent growth rate witnessed in the first quarter of 21. Although the economy is growing modestly, it is lacking the aggressive pace some might have expected following the severity of the latest downturn. In September, the National Bureau of Economic Research s Business Cycle Dating Committee officially determined that a trough in business activity occurred in the U.S. economy in June 29 highlighting that the Great Recession had been over for nearly 15 months. Yet, prior to and since the announcement, the Federal Reserve has been deliberating additional quantitative easing tactics in an effort to further stimulate the economy. Quantitative easing is a way for the Fed to credit themselves money and then use it to purchase long-term assets such as U.S. Treasury bonds. The hope is that purchasing these bonds would lower long-term interest rates on the open market, which in turn is designed to spur economic activity through cheaper CONTINUED: Economic Highlights Page 1» Although the economy is growing modestly, it is lacking the aggressive pace some might have expected following the severity of the latest downturn. ABSORPTION COMPLETIONS RENTS REPORT ON PAGE 6 VACANT LAND ACTUALS FORECAST NUMBER PARCELS SOLD NUMBER ACRES SOLD PRICE PER ACRE ( ALL ) ECONOMIC H I G H L I G H T S Q3 21 Q2 21 Q3 29 Total Employment 79,3 797,2 814, Industrial-using Employment 121,9 122, 135,6 Office-using Employment 35,6 312,8 313,9 Retail-using Employment 162,3 161,5 163,7 Unemployment Rate 14.7% 14.6% 13.5% 3-year Fixed Mortgage 4.4% 4.7% 5.1% Fed. Funds Interest Rate.2%.2%.2% Med. New Home Price $21,4 $183,2 $28,2 Med. Exist. Home Price $122, $126, $125,3 Drivers License Counts 14,4 11,8 14,7 Electric Connections, net 3,5 3,1 1,3 PRICE PER ACRE ( NON-RESORT ) REPORT ON PAGE 8

2 L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Office Report Vacancy Rate Turns Downward THE LAS VEGAS VALLEY office market showed modest improvement from the preceding quarter. After a sustained period of price declines and little construction activity, the vacancy rate broke the five-year cycle of upward movement. During the third quarter, the market reported 68,9 square feet of positive net absorption, pushing the vacancy down 11 basis points from the previous quarter to 24. percent. An additional 21, square feet of new product entered the office market during the third quarter. Only two projects totaling 475, square feet remain under construction and are likely to complete by late 21 or early 211. Of the 2.5 million square feet on the drawing board, nearly 8, square feet is from previously stalled or delayed projects, the majority of which will likely remain that way until the broader economic environment improves. At the end of the third quarter, the vacancy rate dropped to 24. percent, from 24.1 percent in the previous quarter (Q2 21), but remains higher than the 22.5 percent reported one year ago (Q3 29). With 11.9 million square feet of vacant office space in the market, more than four years of excess supply remain assuming historical norms for absoprtion. The average asking rents across the valley fell to $2.9 per square foot per month, or 2.1 percent compared to the previous quarter (Q2 21). On a year-over-year comparison, average asking rents declined 8.1 percent from the $2.27 reported during the same period a year ago (Q3 29). ARA performance by product Type AT 9.6 MILLION square feet, or 19.4 percent of the valley s total office space, Class A buildings continue to modestly increase vacancies. During the third quarter, the Class A segment posted 22,2 square feet of negative net absorption, pushing the vacancy rate to 25.6 percent, which is the highest in the valley. Over the last year, the market witnessed 64,3 square feet of net move out in Class A space, comparably lower than the 43,4 square feet reported during the previous 12 months. The 85, square feet actively under construction is located in the first phase of Tivoli Village at Queensridge and will likely be completed in early 211. Of the 834,8 square feet of planned Class A space, little is expected to begin construction for several years. Class B space currently comprises 72.5 percent of the valley s total office inventory at 36.1 million square feet. The vacancy rate within Class B buildings fell to 24.2 percent during the quarter as the sector reported nearly 122,7 square feet of positive absorption. The market witnessed 21, square feet complete construction in the quarter. A single build-to-suit project totaling 39, square feet remains under construction. With a minority share, the 4. million square feet of Class C space represents 8.1 percent of total inventory. Although the sector recorded 31,6 square feet of negative net absorption during the third quarter, the more mature class C space continues to report the lowest vacancy rate among all classes at 18.2 percent. ARA LAS VEGAS OFFICE MAP market outlook AFTER FIVE YEARS of rising vacancy in the office market, the latest period may signal that the sector will begin to report increased stability in the coming quarters. With little construction activity moving forward and demand turning positive for the first time in two years, it appears that availability may be at or near the peak. While it is easy to latch on to even the smallest bright spot, the return to more normal market conditions is years away, but it must start somewhere. Asking prices in the office market remain 12.3 percent off the peak reached more than two years ago, with effective pricing down much more dramatically as landlords continue to offer concessions, including free rent periods. With distressed sales and lender workouts remaining prevalent, further rental rate reductions are likely as investment levels reset. At the end of the day, demand for professional and medical office product will be dictated by fundamental improvements in the economy. Those improvements haven t arrived yet. ARA M A R K E T IN BRIEF Q3 21 Q3 21 Q2 21 Q3 29 Office Inventory (SF) 49,739, 49,718, 49,455, 475, 496, 348, Vacancy Rate 24.% 24.1% 22.5% Pricing (PSF) $2.9 $2.13 $ , -42, -168, construction activity SELECTED BUILDINGS UNDER CONSTRUCTION Q3 21 Total Type Submarket Sq. Ft. Tivoli Village at Queensridge Professional Northwest 85, Type Submarket Total Sq. Ft Metropolitan Police Headquarters Government Northwest 39, 2 Telephone: Facsimile:

3 office report Q3 21 BY SUBMARKET Total Office Market Total Rentable Square Feet Average Lease Rate (FSG) Class A Office Properties Total Rentable Square Feet Average Lease Rate (FSG) Class B Office Properties Total Rentable Square Feet Average Lease Rate (FSG) Class C Office Properties Total Rentable Square Feet Average Lease Rate (FSG) Northwest Downtown Central/ West Southwest South Southeast Central/ North Total East North Market ,854 7,767,962 3,41,344 6,98,549 7,64,896 8,663,14 1,557,77 2,99,224 1,549,638 1,654,917 49,739,251 2,55, ,878 1,627,17 1,479,549 2,375,894 2,949,557 6, , ,77 11,937, % 1.3% 23.3% 2.9% 27.4% 27.9% 28.6% 7.4% 23.3% 24.% 21, 21, 55,833 (3,29) (54,715) (28,919) 81,452 9,92 7,137 (13,81) 14,541 68,86 $2.12 $2.67 $1.67 $1.79 $2.27 $2.24 $2.13 $1.81 $1.98 $2.9 85, 39, 475, 36, ,21 2, 1,222,63 491,419 27,2 115,213 2,59, ,938,331 1,692,52 1,491, ,77 1,39,53 1,964, ,15 22, 45,376 9,632, ,3 15, ,682 9, , , ,51 1,567 2,468, % 6.3% 21.8% 9.3% 35.5% 37.8% 67.4%.% 23.3% 25.6% (22,4) (9,592) (25,6) (893) 31,861 3,497 (22,173) $2.35 $2.79 $2.56 $2.71 $2.75 $2.81 $2.47 $. $1.6 $ , 85, 115, 173,21 2, 346, , ,569 5,667,629 1,13,119 3,974,849 5,489,896 7,288,71 8,453,284 1,71, ,583 1,432,93 36,82,436 1,38,62 18,578 1,26,527 1,242,86 1,93,635 2,184, ,397 47,782 35,496 8,734, % 16.4% 25.8% 22.6% 26.5% 25.8% 22.9% 5.% 24.5% 24.2% 21, 21, 77,873 9,595 (22,979) (24,179) 46,391 6,26 16,762 (1,613) 14, ,651 $2.2 $2.73 $1.44 $1.74 $2.2 $2.5 $2.2 $1.97 $2.2 $ , 39, 245, ,2 491,419 27,2 115,213 1,755, ,2 65,723 1,514,68 599, , , , ,55 176,638 4,24,641 29,734 62, , ,29 76,564 22,672 29,461 67,451 24,14 734, % 1.3% 18.2% 24.5% 22.9% 16.2% 23.8% 18.3% 13.6% 18.2% (3,293) (6,73) (3,847) 3,2 145 (9,625) (11,468) (31,618) $1.28 $2.29 $1.5 $1.71 $1.7 $1.99 $1.51 $1.69 $1.6 $1.66 L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Quarterly Office Inventory and Vacancy 55 Vacancy (%) Inventory (SF in millions) % 25% 2% 15% 1% 5% % Quarterly Office Average Asking Rents $2.5 $2.4 $2.3 $2.2 $2.1 $2. $ Rental Performance FOR THE SEVENTH consecutive quarter annualized average asking rents have declined based on a full-service gross basis. With an average asking rent of $2.9 per square foot per month, pricing remains down 2.1 percent compared to the prior quarter (Q2 21) and a steeper 8.1 percent compared to the same period of the prior year (Q3 29). It is important to note that pricing among product type and location varies, but evidence of increased concessions by landlords and aggressive price negotiations by tenants are likely pushing effective rents down more sharply than published asking prices. The severity of price declines and move outs have recently receded, but with over 11.9 million square feet of vacant office space available, it is likely the supply-demand imbalance will continue to impact pricing into the foreseeable future. Pressure on landlords and building operators is expected to continue as limited demand for office space persists, forcing an aggressive and competitive marketplace. Additionally, the longer the downturn persists, the more likely commercial foreclosures or lender-involved debt modifications will rise, exerting additional strain on the market. Pricing by sector varied as the Class A segment reported average asking rents of $2.61 per square foot, which was down from $2.65 in the preceding quarter. Class B product averaged $1.97 per square foot, down from $2.2 in the previous quarter. Class C buildings averaged $1.66 per square foot, as pricing continued to erode from the previous quarter s posting of $1.68. TBG 3

4 L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Apartment Report Occupancies Rise as Rents Decline RENTS CONTINUED TO PUSH downward with occupancies improving within the professionally-managed apartment market in Las Vegas. By quarter-end, average asking rents across the valley fell.8 percent from the prior quarter (Q2 21) to $76 per unit per month, or $.84 per square foot. On an annual basis, average asking rents declined 9.6 percent. Elevated unemployment, particularly in the construction and hospitality sectors, continue to create a competitive market for apartment owners seeking tenants in a limited-demand environment. Additionally, with availability in the for-sale residential market having swelled 28.3 percent, or an additional 3,5 homes during the quarter, downward pressure on prices may press some apartment renters to consider becoming homebuyers. With depressed housing prices persisting for more than two years and near record-high unemployment, the impact on apartments has been significant. Apartment property owners ability to service debt requirements remains challenging, a condition that will likely persist beyond next year. Although average asking rents continue to decline, average occupancies within the Las Vegas valley moved upward for the third consecutive quarter. During the third quarter of 21, the market posted an average occupancy rate of 91.9 percent, up 1.2 percentage points from the previous quarter (Q2 21). Compared to the same period a year ago (Q3 29), average occupancies reported an increase of.8 points. Despite average occupancies trending upward, they remain below historical norms, with 5- and 1-year market averages of 93. percent and 93.6 percent, respectively. ARA Sales Performance DURING THE THIRD quarter, limited sales transactions occurred with two communities reportedly changing hands. In the northwest portion of the valley, Liberty Square at Providence transferred ownership in a quitclaim deed for $23 million or $15,5 per unit. The complex consists of newly constructed inventory that contain a condominiums overlay. Details of the transfer were not available. Also in the northwest portion of the valley, near Decatur Boulevard and Vegas Drive, the 1-unit Golden Pond Village apartments sold for $3.8 million, or $38,1 per door. The latest transaction is not much different from the $3.7 million sales price recorded in September of 2. Looking ahead, downward pressure on asking rents are likely to keep operating revenue below peak levels, indicating sales values will likely be adjusted back to pre-boom levels. Distressed sales activity is expected to represent the majority of volumes during the next several quarters. ARA performance by product Class COMPOSING THE lowest share of total apartment inventory with 15.7 percent, Class A product posted the smallest pricing decline among all classes at 8.8 percent compared to a year ago, with an average asking rent of $931 per unit per month, or $.94 per square foot. Average asking rents in Class A apartments have been impacted the least and remain significantly higher compared to the broader market. Occupancies have rebounded from their low over a year ago, posting an average occupancy rate of 92.3 percent, an increase of 2. points from the 9.3 percent reported during the same period a year ago (Q3 29). With 38.6 percent of total apartment market inventory, Class B product reported monthly average asking rents of $81 per unit or $.86 per square foot, reflecting a decline of 9.1 percent compared to the prior year s average of $891 per M A R K E T IN BRIEF Q3 21 market outlook W I T H P O P U L AT I O N growth stagnant and broader sectors of the local economy remaining challenged, pricing conditions within the apartment market may linger near or below their current levels for a significant period. It is also worth nothing that the multi-family market may see further boosts in occupancy as the anticipated unit per month. While the price decline remains significant, this is the first time in three quarters for which year-overyear declines have not been in the double-digits. Demand for Class B product remains the highest among any sector in terms of occupancy with an average occupancy rate of 92.7 percent, up from 92.1 percent one year ago. Pricing among more mature Class C properties, representing 45.8 percent of the market, continues to feel the largest impact with prices declining 1.6 percent over the last 12 months. An average asking rent of $659 per unit per month was posted during the third quarter of 21, representing the fourth consecutive quarter of double-digit price declines. Class C product reported an average occupancy of 91. percent, up a modest.5 points from a year ago, and the first time occupancies showed improvement in two years. ARA Q3 21 Q2 21 Q3 29 Average Rent per Unit $76 $766 $841 Average Rent per SF $.84 $.85 $.93 Annual Rent Growth -9.6% -1.6% -5.5% Average Occupancy 91.9% 9.7% 91.1% expiration of the homebuyer tax credit likely accelerated the attrition of apartment renters into homebuyers. The slowdown in price declines for several quarters indicates that the apartment market may be reaching its proverbial bottom. Nevertheless, the southern Nevada economy CONTINUED: Growth Page 1» 4 Telephone: Facsimile:

5 $95 $9 $85 $8 $75 $7 $65 MARKET PERFORMANCE MEASURES Q3 21 Q3 29 Average Average Average Occupancy Average Average Occupancy Rental Rate Q3 21 VS. Q3 29 SF/Unit Rent/Unit Rent/SF Rate (%) Rent/Unit Rent/SF Rate (%) Growth BY SUBMARKET BY CLASS 1 Northwest 2 North 3 Northeast 4 West 5 Central/East 6 Southwest 7 South 8 Southeast Class A Class B Class C Market Totals/Averages: Quarterly Average Apartment Rents % % -1.1% % % -1.% % % -9.5% % % -7.8% % % -12.1% 1, % % -7.9% % % -7.9% % % -11.1% % 1, % -8.8% % % -9.1% % % -1.6% 92 $76 $ % $841 $ % -9.6% Quarterly Average Occupancies 1% 98% 96% 94% 92% 9% 88% 86% 26 Class: C A B L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Performance By Submarket 1 In the northwest submarket, apartment communities posted an average annual decline of 1.1 percent in pricing as average asking rents demanded $765 per unit per month during the third quarter. On a yearover-year basis, pricing has now declined for eight consecutive quarters, which may have fallen to a point to spur additional demand as average occupancy levels rose to 93.3 percent compared to the 92.1 percent one year ago. The latest period represents the highest occupancy rate reported in two years. 2 Representing the smallest of any submarket with 4.9 percent of total market inventory, at $766 per unit per month, the north portion of the valley posted a 1.-percent decline in average asking rents over the last year. Additionally, the occupancy levels have remained significantly below the market average but pushed up.8 percentage points during the third quarter to 89.8 percent. The north submarket still reports the lowest occupancy levels across the valley. 3 Average asking rents in the northeast submarket fell 9.5 percentage points to $641 per unit, or $.75 per square foot, on par with the broader market. However, the average occupancy rate rose 3.1 percentage points compared to the prior year to 92.2 percent. This is the largest annual increase in occupancy among all submarkets. 4 Representing the largest of any submarket with 25. percent of total market inventory, at $772 per unit per month, or $.85 per square foot, the west portion of the valley posted a 7.8-percent decline in average asking rents over the last year. While average asking rents fell across all submarkets, the west submarket reported the lowest rate of decline. Occupancy levels also dipped.3 percentage points, to 91.2 percent. 5 Average asking rents witnessed the deepest decline in the central/east submarket, falling 12.1 percent year-overyear, to $673 per unit per month, or $.81 per square foot. Average occupancy in the area was reported at 9.5 percent, a.9 percentage point increase from the 89.6-percent occupancy rate reported during the same period of the prior year (Q3 29). 6 Apartment communities within the southwest submarket witnessed average asking rents slide 7.9 percent to $915 per unit per month, or $.92 per square foot. The southwest submarket continues to demand the highest rents of any submarket. The average occupancy rate for the area increased 1.6 percentage points to 93.7 percent, which is the highest level posted in two years. LAS VEGAS APARTMENT MAP 7 Comprising 9.8 percent of total market inventory, average asking rents in the south submarket declined 7.9 percent year-over-year to $755 per unit per month, or $.84 per square foot. The average occupancy rate fell 1.2 percentage points to 9.7 percent from the 91.9-percent occupancy rate reported during the same period of the prior year (Q3 29). 8 Representing 13.5 percent of total market inventory, apartment communities in the southeast portion of the valley, CONTINUED: Properties Page 1» 5

6 L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Retail Report Positive Absorption as Prices Fall DURING THE THIRD QUARTER of 21, retail vacancies declined for the second consecutive quarter, although average asking rents among anchored-retail centers also showed signs of continued weakness. At the close of the third quarter of 21, the vacancy rate fell a modest five basis points to 1.7 percent compared to the previous quarter. Compared to the same period of the prior year (Q3 29), the vacancy rate remains.3 percentage points higher. While the vacancy rate has come down for two consecutive quarters, it has continued to hang above 1 percent for more than a year, suggesting pressure on average asking rents will continue. During the third quarter, average asking rents fell to $1.6 per square foot per month, or down 17.9 percent from the $1.95 reported one year ago. Prices are off 27.3 percent from the peak reported in early 28. During the quarter, the market witnessed a total of 47,2 square feet of positive net absorption as more retail tenants moved into space than moved out. This is the second consecutive quarter in which the market witnessed the absorption of second-generation space outpace move-outs, a trend not reported since the end of 25. By the end of the third quarter of 21, the retail market reported 51.2 million square feet of inventory, as 25,2 square feet of new in-line-shop space was completed in a Lowe s anchored center in the northwest submarket. Projects that remain actively under construction total approximately 524, square feet while plans for 4.7 million square feet remain on the drawing board. An additional 1.3 million square feet of space has stopped development due to the current economic environment and is not likely to resume in the near term. ARA rental Performance ON AN ANNUALIZED basis, average-asking rents in the retail sector accelerated downward for the ninth consecutive quarter to $1.6 per square foot per month. Pricing remains down 4.6 percent from the $1.68 per square foot reported during the previous period (Q2 21). For a year-over-year comparison, rents fell 17.9 percent from the $1.95 per square foot report during the third quarter of 29. This latest decline is the largest drop in average asking rents over a 12-month period. Current pricing levels are near a six-year low and remain down 27.3 percent from its peak of $2.2 per square foot. As the supply-demand imbalance corrects itself into recovery, pricing will likely remain suppressed to below historical averages. For the third quarter of 21, average asking rents by product type were as follows: (a) power centers reported an above-average $1.86 per square foot; (b) community centers posted above-average rates of $1.64 per square foot; and (c) neighborhood centers reported a below-average rental rate of $1.52 per square foot. ARA performance by product Type REPRESENTING MORE than a third of total market inventory, space in power centers totaled 18.3 million square feet. Power centers continue to outperform the market with only 1.3 million square feet available, for a vacancy rate of 7. percent. Vacancies among power centers declined for the third consecutive quarter, reporting 58,6 square feet of positive absorption during the latest period. With the lowest share of total market inventory (25.5 percent of the total), community centers also witnessed a slight increase in vacancies. With nearly 5,7 square feet of negative net absorption during the quarter, the vacancy rate moved to 11.8 percent. Largely attributable to the downturn was the west submarket, which posted 25,6 square feet of negative net absorption. In addition, the east submarket posted a marginal 5,5 square feet construction activity M A R K E T IN BRIEF Q3 21 of net move out while all other submarkets reported positive absorption. The sector added 25,2 square feet of new inventory during the quarter, which leaves 524, square feet actively under construction. With 38.8 percent of total retail inventory, neighborhood centers represent the largest segment of the market and continue to post the highest vacancy rate at 13.3 percent. Neighborhood centers also posted a modest 5,7 square feet of negative net absorption during the quarter. While several submarkets witnessed net move outs, the northwest and northeast submarkets each posted positive absorption of more than 13, square feet. By quarter-end, there were no neighborhood retail projects currently under construction, and the 94,6 square feet planned will likely remain on the drawing board. ARA SELECTED RETAIL CENTERS UNDER CONSTRUCTION Q3 21 Retail Inventory (SF) Vacancy Rate Pricing (PSF) Total Type Submarket Sq. Ft. Tivoli Village at Queensridge Community West 45, Caroline s Court Community Northwest 74, ,164, 51,139, 5,999, 524, 55, 69, 1.7% 1.7% 1.4% $1.6 $1.68 $ , 188, 442, 6 Telephone: Facsimile:

7 RETAIL REPORT Q3 21 Submarket Northwest North L.V. Northeast West East Southwest Southeast Total Market Total Retail Market Total Square Feet (GLA) Average Lease Rate (NNN) ,249,29 6,978,49 3,296,451 8,,781 6,211,471 8,568,224 12,859,329 51,163, , , , , , ,985 1,287,881 5,468,88 8.8% 12.2% 7.3% 12.4% 15.6% 7.8% 1.% 1.7% 25,174 25,174 2,516 (424) 13,3 1,23 (31,53) (3,488) 38,465 47,249 $2.19 $1.69 $1.47 $1.47 $1.29 $1.92 $1.66 $ ,9 974, ,328 1,28, 1,58,128 44,717 4,675,457 73,956 45, 523,956 Power Centers - Retail Centers >1, SF With Minimal or No In-Line Space Total Square Feet (GLA) Average Lease Rate (NNN) 5 2,189, , % (1,891) $ ,623, , % $2.4 63, ,1 6,5.6% 3 $ ,79, ,29 4.5% 38,121 $1.85 1,2, 4 1,23,293 71,926 6.% (5,496) $ ,372, , % 654 $ , ,851, , % 27,154 $ , ,263,154 1,285,615 7.% 58,572 $1.86 2,228,668 Community Centers - Retail Centers With Multiple Anchors Total Square Feet (GLA) Average Lease Rate (NNN) 8 1,99,61 143, % 25,174 9,124 $ , ,58,952 12,45 8.% 2,64 $2.8 26,99 7 1,54,911 41,949 4.% $ , ,381,43 429, % (25,6) $1.42 8, 45, 11 1,864,47 359, % (5,465) $ ,11 57, % 6, $ , ,367, , % 7,682 $ , 85 13,63,371 1,535, % 25,174 (5,655) $1.64 1,542,29 523,956 Neighborhood Centers - Retail Centers With Supermarket Anchors >3,SF Total Square Feet (GLA) Average Lease Rate (NNN) 17 1,96,58 137,79 7.% 13,283 $ ,9 29 2,845,5 513, % (3,28) $ , 17 1,298, , % 13, $ ,54, , % (2,318) $ ,143,78 536, % (2,92) $ ,49, ,3 9.3% (1,142) $1.7 56, 45 4,639, , % 3,629 $ , ,837,43 2,647, % (5,668) $ ,58 L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Quarterly Retail Inventory and Vacancy 6 Inventory Vacancy (%) (SF in millions) % 1% 5% % $2.3 $2.2 $2.1 $2. $1.9 $1.8 $1.7 $1.6 $1.5 Quarterly Retail Average Asking Rents market outlook THE VACANCY RATE among anchored-retail centers is showing signs of stabilizing, but pricing remains a concern. With over two years of excess inventory on the market and the decline in pricing accelerating downward for eight quarters, average asking rents may soon approach levels not seen in nearly a decade. While difficult to paint all space with a single brush, broader market trends are clear. Looking forward, the significant declines in pricing may have long-term effects on recovery as property owners and lenders adjust their return and timing expectations. With taxable retail sales showing few increases over the latest downturn, and consumer confidence near record lows, retailers will likely continue waiting before further pursuing growth opportunities in southern Nevada. The upcoming holiday season, when most retailers turn an annual profit, will be a vital measurement in determining the strength and sustainability of the recovery in the local retail market. ARA LAS VEGAS RETAIL MAP 7

8 L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Vacant Land Report Sales Appear to be Reaching the Bottom of the Cycle THE LAS VEGAS VALLEY vacant land market appears to be reaching the bottom of the economic cycle. The key question remains, how long will the market remain there? Pricing edged up during the third quarter of 21 after reaching a nearly eight-year low in the previous quarter. Additionally, traditional arms-length transactions outpaced lender-involved sales for the second consecutive quarter. Nevertheless, sales volumes declined significantly after more than a year of increases. Excluding resort property, prices improved during the third quarter as the price per acre rose to $212,1, or $4.87 per square foot, an increase of 37.1 percent over the previous quarter (Q2 21). Compared to the same period a year ago (Q3 29), pricing for non-resort properties remained down 6.1 percent, the smallest reported decline since the beginning of the recession. Current values suggest that from peak-to-present (Q4 27 to Q3 21), non-resort land prices have depreciated by 77.4 percent. It is important to note that a single-period increase in prices does not infer a trend, and that a significant decline in land values remains. Additionally, the mix of properties transferred plays a key role in average reported values. For example, during the third quarter, approximately 44 acres transferred with a Trustee s Deed Upon Sale, or foreclosure, along Interstate 215 in the southwest submarket at a value of approximately $45, per acre. Further price shifts will likely be attributed to several factors, including proximity to existing infrastructure. An estimated 56.6 percent of the acreage transferred during the quarter did so through a traditional sale, indicating there is still a significant quantity of raw land entering the market through lender acquisitions. While a few small parcels along South Las Vegas Boulevard (South Strip) transacted, there were no resort corridor transactions recorded during the third quarter of 21. With the tourism sector suffering from the economic downturn, the valley s most premium land holdings witnessed limited transactions, with only 2.16 acres of land changing hands for the first nine months of the year. Overall, 454 acres changed hands during the quarter, a 39.1-percent decline from the previous quarter (Q2 21) and a 9.2-percent increase from the same period one year ago (Q3 29). ARA performance by Submarket 1 A total of 34. acres sold in the northwest submarket during the quarter, representing a significant 51.4-percent decline in sales volume compared to the prior quarter; compared to the one year ago sales volumes were down 77.7 percent. Pricing in the northwest submarket slid 7.1 percent over the previous quarter to $123,94 per acre, or $2.84 per square foot. Compared to the same period a year ago, pricing increased by 11.4 percent. 2 With 69.2 acres sold, or 15.2 percent of the market-wide total during the third quarter, the north portion of the valley witnessed an increase from the 36.9 acres posted in the previous quarter and 4.4 acres recorded the same period a year ago. As more property changed hands, pricing declined a significant 78.3 percent from the previous quarter and 75.5 percent from 12 months ago to an average price of $78,731 per acre, or $1.81 square foot. Pricing in the north reflects a nearly 19-acre transfer under a trustee s deed at an average price of $1.34 per square foot. The north reported the lowest average value among all submarkets. 3 The northeast portion of the valley witnessed 13.6 acres change hands, or 3. percent of total market activity. Sales volumes remained down 72.2 percent from the prior quarter but up 13.2 percent compared to one year ago when only 5.9 acres sold. At an average price per acre of $176,73, the price of land in the northeast increased 119. percent and percent when compared to the previous quarter and same period a year ago, respectively. Continued Next Page» M A R K E T IN BRIEF Q3 21 Q3 21 Q2 21 Q3 29 All Land Transactions LAS VEGAS VACANT LAND MAP No. of Parcels Sold No. of Acres Sold Price Per Acre $212,11 $187,779 $264,4 Price Per SF $4.87 $4.31 $6.6 Year-over-Year Appreciation -19.7% -26.5% -49.7% Pro Forma Excluding Resort Property An estimated 56.6 percent of the acreage transferred during the quarter did so through a traditional sale... No. of Acres Sold Price Per Acre $212,11 $154,665 $225,999 Price Per SF $4.87 $3.55 $5.19 Year-over-Year Appreciation -6.1% -39.4% -5.8% 8 Telephone: Facsimile:

9 VACANT LAND REPORT Q3 21 Parcel Size Number of Acres Sold Less than to to to to 49.9 Greater than 5. TOTAL Average Price Per Acre Less than to to to to 49.9 Greater than 5. AVG. PRICE PER ACRE AVG. PRICE PER SF Please note: Resort Corridor ( 1 ) is excluded from total Northwest North Northeast West Central/ Southwest Airport/ Southeast Downtown Total Resort East South Market Corridor $22,532 $14,657 $67,114 $ $294,643 $254,362 $77,4 $134,4 $ $271,351 $ $4,389 $81,975 $671,141 $ $ $217,758 $41,667 $461,538 $ $237,82 $ $141,699 $64,428 $32,931 $ $ $151,17 $552,958 $159,281 $ $19,131 $ $ $58,263 $ $ $ $157,723 $ $196,629 $ $141,934 $ $ $ $ $ $ $459,67 $ $181,5 $ $323,953 $ $ $ $ $ $ $ $ $115,43 $ $115,43 $ $123,94 $78,731 $176,73 $ $294,643 $255,47 $558,947 $162,179 $ $212,11 $ $2.84 $1.81 $4.6 $. $6.76 $5.86 $12.83 $3.72 $. $4.87 $. L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 $1. $.9 $.8 $.7 $.6 $.5 $.4 $.3 $.2 $.1 $. Average Price Per Acre ( Exclusive of Resort Property ) ($ in millions) Number of Acres Sold ( Inclusive of Resort Property ) 1, «From Previous Page a 52.1-percent decline in sales market outlook 4 The third quarter of 21 witnessed no material land sales in the west submarket. 5 In the central/east submarket, a single transaction for.6 acres occurred during the third quarter. There are no comparable transactions in the prior quarter and sales volume compared to year ago, when 6. acres sold, has significantly declined. On a year-over-year basis, pricing jumped percent to an average price per acre of $294,643, or $6.76 per square foot, with a bank-owned parcel sale during the quarter. 6 Witnessing the largest share of transactions during the quarter, the southwest submarket recorded acres changing hands, or 36.2 percent of the valley s total sales volume. The latest quarter represents volume compared to the prior quarter and a 41.4-percent increase compared to 12 months ago. Compared to the previous quarter, the average price per acre increased 85.4 percent to $255,47 per acre, or $5.86 per square foot. Pricing declined 26.9 percent from the same period a year ago when the market demanded $349,31 per acre. 7 Comprising 7.9 percent of the total market activity, sales volumes in the airport/ south submarket declined 16.8 percent from the previous quarter and 43.8 percent from the same period a year ago. However, pricing climbed 77.3 percent from the previous quarter to an average price per acre of $558,947, or $12.83 per square foot, this highest among all submarkets. Compared to one year ago, pricing is up a larger percent. Values were impacted by a handful of premium-priced South Strip transactions. 8 The southeast portion of the valley recorded acres transferring ownership during the quarter. Such activity represented 3.1 percent of the valley s total sales volume. Average pricing reflected an increase of 23.1 percent from the previous quarter as the average price per acre went from $131,747 to $162,179, or $3.72 per square foot. Pricing remains down 44.1 percent compared to the prior year. 9 1 There were no sales in the downtown or resort corridor submarket during the third quarter. Transactions in these CONTINUED: Page 11» WITH THE COMMERCIAL and industrial real estate sectors reporting approximately 35 million square feet of combined availability, over 16, available homes on the market, and a lack of demand across all segments, demand for raw land is limited. The opportunity for new developments that pencils out is significantly restricted in today s challenging economic environment. This will continue to put downward pressure on land values. Recent transactions are likely being picked up by investors who maintain a longer-run vision and are more willing to ride out the downturn. The pricing of bank sales CONTINUED: Labor Force Page 11» 9

10 L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Economic Highlights «Continued From Cover credit. That said, Fed Chairman Ben Bernanke continues to indicate that he would use such tools to prevent the economy from fluttering into another recession and witnessing further declines in wages and prices; additional evidence suggests the majority of the Federal Reserve Board is in agreement on this policy. Although methods to stimulate the economy can have both positive and negative effects, it often does not instill confidence among consumers. While the Fed has purchased $1.7 trillion in debt and securities in 29, and the economy has come out of the recession and witnessed sustainable, albeit slow, growth, its effects on confidence in the overall economy has been minimal. In September, the Consumer Confidence Index recorded a decline of 9.2 percent, or 4.9 points compared to a year ago, falling to Consumers future expectations retreated further from 73.7 to 65.4, down 11.2 percent compared to 12 months ago. While the latest downward trend in consumer confidence may be partially blamed on the election cycle, as the index has a history of being lower before a midterm election, the fact that consumers feel worse today than they did a year ago is tough to ignore and will likely impact the ultimate recovery cycle. Even as consumers illustrate their pessimism, the equities markets rebounded considerably in the third quarter, indicating investors are willing to take on more risk with the belief that a sustainable recovery will bring profits. The Dow Jones Industrial Average increased 11.6 percent, Standard & Poor s 5 Index gained 9.3 percent and the NASDAQ Composite Index expanded 13.3 percent over the last 12 months. While all three measurements are off from their latest peak in April, the upturn suggests the markets have more confidence and patience for a long-term recovery. While each sector of the economy is performing differently, looking beyond current measures, there is no doubt that many state and local governments will have to reduce their services further while also increasing taxes in 211. These measures may have profound effects on various areas ability to rebound from the current economic stalemate they find themselves in, including Nevada. Additionally, many states were able to help fill past budget gaps with federal dollars provided by the American Recovery and Reinvestment Act. Looking ahead, much of the $14 billion in stimulus divvied out to states has already been spent and is not likely to recur. Nevada will likely have one of the largest budget gaps to narrow when the next biennial legislative session begins in February 211, and looking at economic indicators today suggests that a rebound to the prior business cycle is not likely to occur over the next two years. While the latest taxable sales figures from July indicate 5.5-percent improvement over the prior year in Clark County, they remain 16.3-percent below sales reported two years ago. Additional improvements such as gross gaming revenue, which in Clark County was up 13.8 percent in August compared to the prior year, it was largely attributable to movements in major conventions, high-end baccarat play and other timing elements. Gross gaming revenue for the first eight months of the year remains down nearly 14.5 percent, or nearly $1.5 billion compared to the same period two years ago. As market indicators remain mixed with some degree of instability still present, it is expected that volatility will likely linger in the economy through the rest of the year. Looking forward, southern Nevada has the potential to begin posting slow but sustainable economic gains, similar to what the broader national economy has witnessed over the last 12 months. ARA Growth «Apartment From Page 4 certainly does not look the same as it did just a few years ago when many multi-family units were changing hands at premium prices. That said, it is likely that pricing will not return to pre-bust levels for several years, putting significant pressure on many apartment owners to seek out options to alleviate operating cash flow deficiencies and elevated debt levels. During this period, there is potential for more multi-family properties to change hands, either through foreclosure or distressed sales. ARA Properties «Apartment From Page 5 which includes the City of Henderson, reported a price decline of 11.1 percent over the last 12 months. Average asking rents declined to $85 per unit per month, or $.89 per square foot. Average occupancies in the area recorded a significant increase of 1.8 percentage points over the previous year to 94.2 percent, which is the highest occupancy rate among all submarkets. ARA 1 Telephone: Facsimile:

11 Labor Force «Vacant Land From Page 9 «Vacant Land From Page 9 Economic Outlook will also be a key consideration in the coming years. Raw land is ultimately worth the value of what can be developed on it. With average asking rents in the industrial and commercial sector sliding downward for nearly three years, and new home prices off nearly 38 percent from their peak, significant appreciation in land values will likely not return for several years. ARA Sales markets typically demand a premium price compared to other areas of the valley and sales have been limited through the latest downturn in the business cycle. ARA THE NATIONAL FORECLOSURE CRISIS, thought to be on a slow path to recovery, may once again be in jeopardy. According to the latest Case-Shiller data (July), home prices have increased on an annualized basis in 16 of the 2 metropolitan areas it covers. While a few areas continued to show an annualized decline, Las Vegas was the only one to create a new bottom. Nevertheless, recent news that many of the country s largest banks would begin halting the foreclosure process stemming from recommendations in judicial proceedings and state attorneys general, for possibly improper default judgments based on unaudited and often missing documentation, creates new challenges. Many of the defaulted loans are still expected to complete the foreclosure process but the delay is no doubt an interruption to the inevitable that will likely further affect the pace of the housing recovery. During the third quarter of 21, more job losses were reported in Nevada as the economy continues to seek stabilization in the labor force. Layoffs were largely attributable to cutbacks in the public sector, which shed 3, jobs in August compared to the private sector, which added 2,3 jobs. Most of the losses originated in southern Nevada as the government sector reduced the local workforce by 2,7. While the majority of the recent public sector layoffs were due to the ending of the 21 Census, state and local governments further reduced their workforce by 1,1 employees. With the biennial legislative session approaching, and local levels of government having to submit their budgets to the state beforehand, it is likely that public sector layoffs will continue to occur, especially if a reduction in salaries and benefits from collectively bargaining organizations do not materialize. ARA L A S V E G A S C O M M E R C I A L R E P O R T 3 R D Q U A R T E R 2 1 Layoffs were largely attributable to cutbacks in the public sector, which shed 3, jobs in August compared to the private sector, which added 2,3 jobs. 11

12 BROUGHT TO YOU BY: Christopher D. Bentley Principal Multi-Family Investments Jeremiah D. Drake SENIOR Associate Multi-Family Investments Mark J. Musser Senior Investment Associate Leased Investments 594 SOUTH RAINBOW BOULEVARD Las Vegas, Nv Telephone: Facsimile: VISIT US ON THE WEB AT: THIS INFORMATION HAS BEEN SECURED FROM SOURCES WE BELIEVE TO BE RELIABLE, BUT WE MAKE NO REPRESENTATION OR WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE ACCURACY OF THE INFORMATION. REFERENCES TO SQUARE FOOTAGE OR AGE ARE APPROXIMATE. BUYER MUST VERIFY THE INFORMATION AND BEARS ALL RISK FOR INACCURACIES.