The State of the U.S. & Washington CRE Market: 2008 Review/2009 Outlook Copyright 2008 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, the following information includes projections that are based on various assumptions by CoStar concerning future events and circumstances, as well as historical and current data maintained in CoStar s database. Actual results may vary from the projections presented. The information in this presentation 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. 2 Bethesda Metro Center Bethesda, MD USA 20814 (800) 204-5960 www.costar.com NASDAQ: CSGP
CoStar is The Leading Commercial Real Estate Information Provider We built and maintain the industry s most comprehensive commercial property database Two decades of experience Over 90,000 clients worldwide Publicly traded (CSGP) Operations; U.S., U.K., France $120 million annual research budget $1 Billion Spent on Research
Nearly 1,000 Researchers & Support Staff
2008: 3 Million Miles driven
We Inspected 600,000 Properties in 350 Cities in 3 Countries in 2008
2008 Research Activity 275,000+ Industry players interviewed 2 million+ telephone interviews conducted to verify and collect information 3 million Information emails submitted to CoStar 87,000 SEC filings, CMBS filings, press releases reviewed and abstracted most same night 2.2 Billion web searches run
Largest Most Comprehensive Commercial Real Estate Information Source Ever Compiled 3.2 Million Properties 64.7 billion sq. ft. of commercial inventory 8.7 billion sq ft available 1,167,000 listings More than a trillion dollars in listing value 7.4 million images $3 trillion in sales comparables 5.8 million tenants
General Economy
The Five Stages of Grief Denial Anger Bargaining Depression Acceptance
S&P 500 Down 54% From High
Annualized Change in Gross Domestic Product
Inflation Adjusted Case-Shiller 10-City Composite Index
Housing Values Inflation Adjusted 1890-2008
Japan Housing Bubble Jan-87 Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08
Case-Shiller 10-City Composite Index vs. Indexed Retail Prices per Sq Ft
Case-Shiller 10-City Composite Index Vs. Indexed Flex & Industrial Prices per Sq Ft
Case-Shiller 10-City Composite Index Vs. Indexed A, B, C Office Rents per Sq Ft
Total Employment Growth Actual & Forecast
Worst Job Loss Periods in U.S. History Length and Severity By Number of Jobs
Worst Job Loss Periods in U.S. History Length and Severity By % of Workforce
VIX Index All Time High Risk Aversion
Corporate Borrowing Source: Wall Street Journal
10 Year Fixed Conduit Spreads
CMBS Issuances Market Frozen
Disposable Personal Income
Retail Sales Historically
Non-Store Retail Sales
Consumer Confidence
Holiday Spending (Nov-Dec) as % of Total Annual Spending
Federal Reserve s Industrial Production Index
Total Retail Net Absorption and Change in Total Retail Employment
Industrial Net Absorption and Federal Reserve s Industrial Production Index
Office Employment Growth And Office Net Absorption Top 10 Markets
2008 Leasing Market Review
Office Deliveries by Year 1,216 Million 27% 281 Million 4% 78 Million 1%
Industrial Deliveries by Year 144 Million ----------- 4 Years ----------- 1% 400 Million ----------- 4 Years ----------- 3% 479 Million ----------- 7 Years ----------- 4% 461 Million ----------- 6 Years ----------- 4% 14 Million ------- 1 Year ------- 0%
Retail Deliveries by Year 386 Million 5% 6 Years 460 Million 6% 15 Years
Retail Deliveries by Year & Forecast
Under Construction - Industrial
Office Deliveries by Year & Forecast
Frozen Projects
Frozen Projects
U.S. Retail Leasing Activity
U.S. Industrial Leasing Activity
U.S. Office Leasing Activity
Office Leasing Activity Washington, Atlanta, Dallas
Net Absorption - Retail
Net Absorption - Industrial
Net Absorption Office
Retail - Vacancy Rates 2000 to Current
Industrial Vacancy Rates 2000 to Current
Office - Vacancy Rates 2000 to Current
U.S. Office Vacancy Rates Since 1980
Average Days Retail Space is Vacant Prior To Lease Sign
Average Days Industrial Space is Vacant Prior To Lease Sign
Average Days Office Space is Vacant Prior To Lease Sign
U.S. Quoted Retail Rents Real & Nominal
Industrial Quoted Rents Inflation Adjusted vs. Not
Office - Inflation Adjusted Quoted Rents
The only function of economic forecasting is to make astrology look respectable. John Kenneth Galbraith, economist (1908 2006)
U.S. Retail Vacancy Forecast
U.S. Industrial Vacancy Forecast
U.S. Office Vacancy Forecast
Sales Market Current Conditions
Cap Rates All Property Types (4 Quarter Moving Average)
Overall Retail Sales Volume
Overall Industrial Sales Volume
Historical Office Sales Volume
Average Days on Market Before Retail Property Sells
Average Days on Market Before U.S. Industrial Property Sells
Average Days on Market Before Office Property Sells
Retail Sales Prices / Square Foot
Inflation Adjusted Freestanding Retail Sales Prices / Square Foot
Inflation Adjusted Shopping Center Prices Per Square Foot
Inflation Adjusted U.S. Industrial Sales Prices Per Square Foot
Inflation Adjusted U.S. Flex Sales Prices Per Square Foot
Inflation Adjusted U.S. Class C Office Sales Prices Per Square Foot
Inflation Adjusted U.S. Class B Office Sales Prices Per Square Foot
Inflation Adjusted U.S. Class A Office Sales Prices Per Square Foot
CMBS Loans Placed in Special Servicing
Potential Problem Loans
Washington Metro Market 2008 Review & 2009 Outlook
Case-Shiller 10-City Index
Washington Job Diversification
Washington Job Diversification
Office, Industrial and Retail Commercial Real Estate Inventory Washington United States
Unemployment Rates
Washington Non-Farm Employment Growth
Washington Non-Farm Employment Growth Past 12 Months 30 20 10 0 Thousands of Jobs (10) (20) (30) (40) (50) (60) (70) 2008-Jan 2008-Feb 2008-Mar 2008-Apr 2008-May 2008-Jun 2008-Jul 2008-Aug 2008-Sep 2008-Oct 2008-Nov 2008-Dec
Washington Retail Deliveries
Washington Industrial Deliveries
Washington Office Deliveries 81 Million -------------------- 20% -------------------- 12 Years
U.S. Office Inventories Year 2000
U.S. Office Inventories Year 2009
Vacancy Rates in Washington s 20 Largest Office Submarkets
Washington Retail Leasing Activity
Washington Industrial Leasing Activity
Washington Office Leasing Activity
Washington Retail Net Absorption
Washington Industrial Net Absorption
Washington Office Net Absorption
U.S. Office Net Absorption
Retail Vacancy Rates 2006 to Current
Industrial Vacancy Rates 2000 to Current
2008 Supply-Demand Balance in 20 Largest Office Submarkets Increasing Vacancy Decreasing Vacancy
U.S. Vacancy Rates Year 2008
U.S. Office Vacancy Rates Year 2000
Office Vacancy Rates 2000 to Current
Washington Office Vacancy Forecast
Office Inflation Adjusted Quoted Rents
Washington Office Cap Rates
Washington Office Sales Prices Per Square Foot
Washington Office Sales Volume - Dollars 3 3 2 Billions of Dollars 2 1 1 0 1996 4q 1997 4q 1998 4q 1999 4q 2000 4q 2001 4q 2002 4q 2003 4q 2004 4q 2005 4q 2006 4q 2007 4q 2008 4q
Inflation Adjusted Case Shiller & Washington Retail Prices
Inflation Adjusted Case Shiller & Washington Industrial Prices
Inflation Adjusted Case Shiller & Washington Office Prices
Index of Vacancy Adjusted Rents & Sales Prices (Both Inflation Adjusted)
Washington Metro Recession Bordering on Depression
Washington Metro 30 Years of Stellar Growth
A Infinitesimal Percentage of U.S. Buildings are Green 1 in 15,000 U.S. Commercial Properties are Green Green 0.006% Not Green 99.994%
Direct Rental Rates National
Avoiding Tarnished Legacy? In 1966, Henry Ford II famously argued that implementation of federal safety requirements for automobiles (including lap and shoulder seat belts) would force his eponymous company to close down.
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