The CoStar Industrial Report M I D - Y E A R 2 0 0 9
MID-YEAR 2009 PHOENIX 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 Inventory & Development Analysis...................................................... 5 Construction Activity Map Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties 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............................................................. 14 Leasing Activity Map Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis............................................................... 17 Sales Activity Analysis Select Top Sales Transactions Select Same Building Sales Select Land Sales Analysis of Individual CoStar Markets.................................................. 20 Airport Market Northeast Market Northwest Market Southeast Market Southwest Market 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT A
PHOENIX MID-YEAR 2009 Methodology The CoStar Industrial Report calculates Industrial statistics using CoStar Group's 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 Group's national database includes approximately 62.3 billion square feet of coverage in 2.4 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 Advisory reports, or for information on CoStar s other products and services, please contact us at 1-877-7COSTAR, or visit our web site at www.costar.com Copyright 2009 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. 2 Bethesda Metro Center Bethesda, MD USA 20814 (800) 204-5960 www.costar.com NASDAQ: CSGP B THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
MID-YEAR 2009 PHOENIX Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the tenant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-of-a-kind floor plans. They can be an architectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that generally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typical flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The primary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are buildingtype specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT C
PHOENIX MID-YEAR 2009 Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to be under construction after it has begun construction and until it receives a certificate of occupancy. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
OVERVIEW MID-YEAR 2009 PHOENIX Phoenix s Vacancy Increases to 16.1% Net Absorption Negative (2,995,446) SF in the Quarter The Phoenix Industrial market ended the second quarter 2009 with a vacancy rate of 16.1%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (2,995,446) square feet in the second quarter. Vacant sublease space increased in the quarter, ending the quarter at 2,346,915 square feet. Rental rates ended the second quarter at $7.08, a decrease over the previous quarter. A total of 10 buildings delivered to the market in the quarter totaling 262,741 square feet, with 2,314,489 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Phoenix Industrial market was negative (2,995,446) square feet in the second quarter 2009. That compares to negative (1,943,933) square feet in the first quarter 2009, negative (1,085,090) square feet in the fourth quarter 2008, and positive 72,721 square feet in the third quarter 2008. The Flex building market recorded net absorption of negative (252,902) square feet in the second quarter 2009, compared to positive 84,623 square feet in the first quarter 2009, negative (179,268) in the fourth quarter 2008, and negative (359,044) in the third quarter 2008. The Warehouse building market recorded net absorption of negative (2,742,544) square feet in the second quarter 2009 compared to negative (2,028,556) square feet in the first quarter 2009, negative (905,822) in the fourth quarter 2008, and positive 431,765 in the third quarter 2008. Vacancy The Industrial vacancy rate in the Phoenix market area increased to 16.1% at the end of the second quarter 2009. The vacancy rate was 15.0% at the end of the first quarter 2009, 14.1% at the end of the fourth quarter 2008, and 13.3% at the end of the third quarter 2008. Flex projects reported a vacancy rate of 18.7% at the end of the second quarter 2009, 17.7% at the end of the first quarter 2009, 16.9% at the end of the fourth quarter 2008, and 16.1% at the end of the third quarter 2008. Warehouse projects reported a vacancy rate of 15.8% at the end of the second quarter 2009, 14.6% at the end of first quarter 2009, 13.7% at the end of the fourth quarter 2008, and 12.9% at the end of the third quarter 2008. Largest Lease Signings The largest lease signings occurring in 2009 included: the 168,165-square-foot lease signed by Office Depot Business Services Division at 602 S 63rd Ave in the Southwest market; the 116,538-square-foot deal signed by Olympian Worldwide Moving & Storage, Inc. at 2225 S 43rd Ave in the Southwest market; and the 97,425-square-foot lease signed by Tyco at 801 S 75th Ave in the Southwest market. Sublease Vacancy The amount of vacant sublease space in the Phoenix market increased to 2,346,915 square feet by the end of the second quarter 2009, from 2,197,677 square feet at the end of the first quarter 2009. There were 1,641,509 square feet vacant at the Vacancy Rates by Building Type 1999-2009 25% Flex Warehouse Total Market 20% Vacancy Rate 15% 10% 5% 0% 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 1
PHOENIX MID-YEAR 2009 OVERVIEW end of the fourth quarter 2008 and 1,359,250 square feet at the end of the third quarter 2008. Phoenix s Flex projects reported vacant sublease space of 246,294 square feet at the end of second quarter 2009, down from the 297,972 square feet reported at the end of the first quarter 2009. There were 304,336 square feet of sublease space vacant at the end of the fourth quarter 2008, and 238,008 square feet at the end of the third quarter 2008. Warehouse projects reported increased vacant sublease space from the first quarter 2009 to the second quarter 2009. Sublease vacancy went from 1,899,705 square feet to 2,100,621 square feet during that time. There was 1,337,173 square feet at the end of the fourth quarter 2008, and 1,121,242 square feet at the end of the third quarter 2008. Rental Rates The average quoted asking rental rate for available Industrial space was $7.08 per square foot per year at the end of the second quarter 2009 in the Phoenix market area. This represented a 2.5% decrease in quoted rental rates from the end of the first quarter 2009, when rents were reported at $7.26 per square foot. The average quoted rate within the Flex sector was $12.47 per square foot at the end of the second quarter 2009, while Warehouse rates stood at $6.50. At the end of the first quarter 2009, Flex rates were $13.22 per square foot, and Warehouse rates were $6.61. Deliveries and Construction During the second quarter 2009, 10 buildings totaling 262,741 square feet were completed in the Phoenix market area. This compares to 12 buildings totaling 539,533 square feet that were completed in the first quarter 2009, 30 buildings totaling 1,464,504 square feet completed in the fourth quarter 2008, and 2,448,465 square feet in 52 buildings completed in the third quarter 2008. U.S. Vacancy Comparison Past 8 Quarters Vacancy Rate 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% Phoenix United States There were 2,314,489 square feet of Industrial space under construction at the end of the second quarter 2009. Some of the notable 2009 deliveries include: 2701 E Ryan Rd, a 288,000-square-foot facility that delivered in first quarter 2009 and is now 100% occupied, and 4030 E Quenton Dr, a 73,000-square-foot building that delivered in first quarter 2009 and is now 58% occupied. The largest projects underway at the end of second quarter 2009 were Fowler Distribution Center - Bldg 2, a 1,267,110- square-foot building with 0% of its space pre-leased, and Fowler Distribution Center - Bldg 3, a 682,291-square-foot facility that is 0% pre-leased. Inventory Total Industrial inventory in the Phoenix market area amounted to 282,012,401 square feet in 9,449 buildings as of the end of the second quarter 2009. The Flex sector consisted of 32,800,568 square feet in 1,100 projects. The Warehouse sector consisted of 249,211,833 square feet in 8,349 buildings. Within the Industrial market there were 1,772 owner-occupied buildings accounting for 63,898,475 square feet of Industrial space. Sales Activity Tallying industrial building sales of 15,000 square feet or larger, Phoenix industrial sales figures fell during the first quarter 2009 in terms of dollar volume compared to the fourth quarter of 2008. In the first quarter, 10 industrial transactions closed with a total volume of $45,303,622. The 10 buildings totaled 467,079 square feet and the average price per square foot equated to $96.99 per square foot. That compares to 25 transactions totaling $107,025,191 in the fourth quarter. The total square footage was 1,429,771 for an average price per square foot of $74.85. Total year-to-date industrial building sales activity in 2009 is down compared to the previous year. In the first three months of 2009, the market saw 10 industrial sales transactions with a total volume of $45,303,622. The price per square foot has averaged $96.99 this year. In the first three months of 2008, the market posted 47 transactions with a total volume of $385,035,376. The price per square foot averaged $77.73. Cap rates have been higher in 2009, averaging 8.40%, compared to the first three months of last year when they averaged 6.66%. One of the largest transactions that has occurred within the last four quarters in the Phoenix market is the sale of Southbank II in Phoenix. This 120,800-square-foot industrial building sold for $20,140,000, or $166.72 per square foot. The property sold on 03/26/09, at an 8.30% cap rate. 2.0% 0.0% 2007 2007 2008 2008 2008 2008 2009 2009 Reports compiled by: Adam Jarrett, CoStar Property Research Manager; Tom Summers, CoStar COMPS Research Manager. Source: CoStar Property 2 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
MARKETS MID-YEAR 2009 PHOENIX CoStar Markets & Submarkets In analyzing metropolitan areas in the U.S., CoStar has developed geographic designations to help group properties together, called Regions, 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 into Markets, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Markets Airport Ind Northeast Ind Northwest Ind Southeast Ind Southwest Ind Submarkets North Airport Ind S Airport N of Roeser Ind S Airport S of Roeser Ind SC N of Salt River Ind SC S of Salt River Ind Central Phoenix Ind Scottsdale Airpark Ind Scottsdale/Salt River Ind Deer Vly/Pinnacle Pk Ind Glendale Ind Grand Avenue Ind N Glendale/Sun City Ind North Black Canyon Ind W Phx N of Thomas Rd Ind W Phx S of Thomas Rd Ind Chandler Airport Ind Chandler Ind Chandler N/Gilbert Ind Falcon Fld/Apache Jct Ind Mesa Ind Tempe East Ind Tempe Northwest Ind Tempe Southwest Ind Goodyear Ind SW N of Buckeye Road Ind SW S of Buckeye Road Ind Tolleson Ind 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 3
PHOENIX MID-YEAR 2009 EMPLOYMENT AND TENANT Total Employment by Industry Percent of Total Employment by Industry Total Employment Growth Total Number of Jobs Added Per Year 4% 14% 10% 6% 0% 12% 7% 16% 21% 8% 2% Natural Resources & Mining Construction Manufacturing Trade, Transportation & Utilities Information Financial Activities Professional & Business Services Education & Health Services Leisure & Hospitality Other Services Government Percent Growth 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% Phoenix U.S. Average 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Department of Labor, Bureau of Labor Statistics Source: Department of Labor, Bureau of Labor Statistics Total Employment Growth Cumulative Growth in Jobs Over the Past 5 Years Market Employment Growth Inventory Growth Difference Atlanta 0.50% 6.80% -6.30% Chicago -0.40% 5.10% -5.50% Dallas/Ft Worth 3.90% 7.90% -4.00% Denver 3.50% 4.10% -0.60% Detroit -11.60% 1.20% -12.80% Houston 6.90% 6.90% 0.00% Inland Empire (California) -1.60% 20.70% -22.30% Los Angeles -2.40% 1.80% -4.20% Northern New Jersey -0.10% 2.60% -2.70% Pittsburgh 0.60% 1.40% -0.80% Phoenix 7.50% 11.70% -4.20% Source: Department of Labor, Bureau of Labor Statistics Historical Unemployment Rates Industrial* Employment Growth Number of Industrial* Jobs Added Per Year Percent Growth 6.0% Phoenix U.S. Average 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Department of Labor, Bureau of Labor Statistics. * Industrial employment is defined as jobs in the Manufacturing, and Trade, Transportation & Utilities industries 10.0% 9.0% Phoenix U.S. Average Percent Unemployment 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 Source: Department of Labor, Bureau of Labor Statistics 4 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
INVENTORY & DEVELOPMENT MID-YEAR 2009 PHOENIX Construction Highlights in Select CoStar Markets Color Coded by Under Construction Square Footage as a Percentage of Existing Inventory 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 5
PHOENIX MID-YEAR 2009 INVENTORY & DEVELOPMENT Historical Deliveries 1982-2009 14.0 12.5 12.4 Deliveries Average Delivered SF 12.0 10.9 11.0 11.4 Millions of SF 10.0 8.0 6.0 4.0 6.0 5.4 7.1 6.6 4.9 3.1 3.8 3.8 3.1 6.6 7.6 8.8 9.5 7.9 7.6 7.9 5.2 3.8 5.2 6.1 7.8 3.1 2.0 1.5 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 * 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 Southwest Ind 3 2,256,378 306,977 13.6% 62,991 752,126 Airport Ind 1 34,000 34,000 100.0% 26,642 34,000 Northwest Ind 1 24,111 0 0.0% 22,141 24,111 Northeast Ind 0 0 0 0.0% 20,682 0 Southeast Ind 0 0 0 0.0% 27,804 0 Totals 5 2,314,489 340,977 14.7% 29,846 462,898 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2005 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 12.0 Leased Un-Leased 2,500 Preleased Un-Leased 10.0 2,000 Millions of SF 8.0 6.0 4.0 Thousands of SF 1,500 1,000 T 2.0 500 0.0 2005 2006 2007 2008 2009 0 2009 2009 2010 6 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
INVENTORY & DEVELOPMENT MID-YEAR 2009 PHOENIX Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 4.5 4.0 4.1 Construction Starts 4.0 4.0 4.0 Deliveries 3.5 3.2 3.3 3.4 3.2 Millions of SF 3.0 2.5 2.0 1.5 1.3 2.0 2.6 1.9 1.2 2.7 2.8 2.5 1.3 1.7 2.4 2.2 1.5 1.0 0.5 0.0 0.7 0.4 0.5 0.5 0.3 0.3 0.0 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 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 19 381,274 61,894 16.2% $11.69 77,089 304,185 50,000 SF - 99,999 SF 2 133,000 72,340 54.4% $6.60 0 133,000 100,000 SF - 249,999 SF 0 0 0 0.0% $0.00 0 0 250,000 SF - 499,999 SF 1 288,000 288,000 100.0% $0.00 288,000 0 >= 500,000 SF 0 0 0 0.0% $0.00 0 0 Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi-Tenant Use Based on Total RBA 2009 Deliveries Currently Under Construction By Building Type By Tenancy Type 46% 32% 12% 41% 54% 68% 88% 59% Multi Single Multi Single Flex Warehouse Multi Single 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 7
PHOENIX MID-YEAR 2009 INVENTORY & DEVELOPMENT 8 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
INVENTORY & DEVELOPMENT MID-YEAR 2009 PHOENIX 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 9
PHOENIX MID-YEAR 2009 FIGURES AT A GLANCE Flex Market Statistics Mid-Year 2009 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 146 5,386,576 822,409 839,498 15.6% (21,400) 0 0 $13.14 Northeast Ind 201 4,715,122 1,007,616 1,054,068 22.4% (260,531) 0 0 $14.15 Northwest Ind 256 6,301,284 1,433,134 1,436,134 22.8% (67,831) 68,099 0 $10.85 Southeast Ind 454 14,790,078 2,196,340 2,376,093 16.1% 187,068 429,972 0 $12.81 Southwest Ind 43 1,607,508 414,113 414,113 25.8% (5,585) 0 0 $10.62 Totals 1,100 32,800,568 5,873,612 6,119,906 18.7% (168,279) 498,071 0 $12.47 Warehouse Market Statistics Mid-Year 2009 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 1,747 45,047,226 5,119,093 5,866,783 13.0% (946,912) 0 34,000 $7.33 Northeast Ind 601 11,871,505 1,455,968 1,568,476 13.2% (355,582) 0 0 $10.86 Northwest Ind 2,216 48,430,131 6,925,054 7,074,614 14.6% (1,231,397) 66,815 24,111 $6.84 Southeast Ind 2,657 71,708,323 9,989,642 10,638,620 14.8% (1,319,506) 177,388 0 $8.06 Southwest Ind 1,128 72,154,648 13,697,958 14,139,843 19.6% (917,703) 60,000 2,256,378 $4.67 Totals 8,349 249,211,833 37,187,715 39,288,336 15.8% (4,771,100) 304,203 2,314,489 $6.50 Total Industrial Market Statistics Mid-Year 2009 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Airport Ind 1,893 50,433,802 5,941,502 6,706,281 13.3% (968,312) 0 34,000 $7.84 Northeast Ind 802 16,586,627 2,463,584 2,622,544 15.8% (616,113) 0 0 $11.96 Northwest Ind 2,472 54,731,415 8,358,188 8,510,748 15.6% (1,299,228) 134,914 24,111 $7.37 Southeast Ind 3,111 86,498,401 12,185,982 13,014,713 15.0% (1,132,438) 607,360 0 $8.77 Southwest Ind 1,171 73,762,156 14,112,071 14,553,956 19.7% (923,288) 60,000 2,256,378 $4.77 Totals 9,449 282,012,401 43,061,327 45,408,242 16.1% (4,939,379) 802,274 2,314,489 $7.08 10 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
FIGURES AT A GLANCE MID-YEAR 2009 PHOENIX Flex Submarket Statistics Mid-Year 2009 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 46 746,866 88,163 88,163 11.8% (26,912) 0 0 $11.55 Chandler Airport Ind 10 670,120 219,624 219,624 32.8% 288,000 288,000 0 $15.79 Chandler Ind 73 2,978,507 436,468 478,210 16.1% 9,898 22,782 0 $14.14 Chandler N/Gilbert Ind 99 2,540,133 361,328 426,915 16.8% (43,856) 51,825 0 $10.86 Deer Vly/Pinnacle Pk Ind 79 3,086,224 746,561 746,561 24.2% (27,184) 68,099 0 $11.45 Falcon Fld/Apache Jct Ind 24 471,717 155,907 155,907 33.1% (6,217) 0 0 $10.83 Glendale Ind 11 371,083 146,486 149,486 40.3% (28,064) 0 0 $11.97 Goodyear Ind 13 401,282 232,329 232,329 57.9% (6,295) 0 0 $9.79 Grand Avenue Ind 25 230,855 24,072 24,072 10.4% (6,600) 0 0 $9.00 Mesa Ind 36 329,801 4,100 4,100 1.2% 11,000 0 0 $13.04 N Glendale/Sun City Ind 22 469,358 99,214 99,214 21.1% 4,174 0 0 $11.46 North Airport Ind 43 2,077,890 417,772 432,772 20.8% (20,622) 0 0 $11.11 North Black Canyon Ind 61 1,249,820 246,416 246,416 19.7% 16,663 0 0 $10.10 S Airport N of Roeser Ind 55 2,273,568 201,259 203,348 8.9% 3,907 0 0 $12.72 S Airport S of Roeser Ind 7 93,097 0 0 0.0% 0 0 0 $11.25 SC N of Salt River Ind 35 889,995 203,378 203,378 22.9% (4,685) 0 0 $18.27 SC S of Salt River Ind 6 52,026 0 0 0.0% 0 0 0 $0.00 Scottsdale Airpark Ind 96 2,505,967 565,879 601,284 24.0% (118,565) 0 0 $14.91 Scottsdale/Salt River Ind 59 1,462,289 353,574 364,621 24.9% (115,054) 0 0 $13.68 SW N of Buckeye Road Ind 11 222,823 0 0 0.0% 0 0 0 $0.00 SW S of Buckeye Road Ind 11 590,779 0 0 0.0% 0 0 0 $0.00 Tempe East Ind 43 1,149,557 98,958 98,958 8.6% (11,217) 0 0 $13.07 Tempe Northwest Ind 66 1,953,147 444,542 452,142 23.1% (27,170) 67,365 0 $11.93 Tempe Southwest Ind 103 4,697,096 475,413 540,237 11.5% (33,370) 0 0 $12.76 Tolleson Ind 8 392,624 181,784 181,784 46.3% 710 0 0 $11.57 W Phx N of Thomas Rd Ind 45 687,275 164,385 164,385 23.9% (22,320) 0 0 $7.03 W Phx S of Thomas Rd Ind 13 206,669 6,000 6,000 2.9% (4,500) 0 0 $0.00 Totals 1,100 32,800,568 5,873,612 6,119,906 18.7% (168,279) 498,071 0 $12.47 Existing Inventory Vacancy Warehouse Submarket Statistics Mid-Year 2009 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 220 3,085,185 280,094 280,094 9.1% 4,988 0 0 $10.68 Chandler Airport Ind 54 1,196,840 436,328 436,328 36.5% 55,232 0 0 $8.28 Chandler Ind 286 14,356,261 1,217,726 1,289,176 9.0% (29,534) 0 0 $9.24 Chandler N/Gilbert Ind 612 13,081,399 3,078,219 3,193,501 24.4% (495,862) 78,658 0 $7.61 Deer Vly/Pinnacle Pk Ind 521 12,170,440 1,161,682 1,261,799 10.4% (157,010) 66,815 24,111 $8.97 Falcon Fld/Apache Jct Ind 172 3,861,548 489,104 559,087 14.5% 64,287 98,730 0 $9.22 Glendale Ind 73 3,146,793 1,582,893 1,582,893 50.3% (81,018) 0 0 $4.75 Goodyear Ind 105 7,678,374 2,026,066 2,026,066 26.4% (71,540) 0 306,977 $4.69 Grand Avenue Ind 575 12,571,373 1,373,816 1,373,816 10.9% (222,588) 0 0 $5.84 Mesa Ind 412 6,298,848 1,425,852 1,451,996 23.1% (159,575) 0 0 $7.33 N Glendale/Sun City Ind 117 2,869,952 920,469 932,469 32.5% 66,120 0 0 $9.67 North Airport Ind 478 11,398,021 1,136,009 1,452,215 12.7% (368,292) 0 34,000 $8.25 North Black Canyon Ind 185 3,307,519 351,732 351,732 10.6% (131,503) 0 0 $8.12 S Airport N of Roeser Ind 427 11,428,244 1,426,958 1,702,965 14.9% (404,306) 0 0 $7.82 S Airport S of Roeser Ind 153 4,247,696 664,903 673,329 15.9% 51,440 0 0 $8.47 SC N of Salt River Ind 590 16,269,882 1,771,662 1,918,713 11.8% (217,505) 0 0 $5.92 SC S of Salt River Ind 99 1,703,383 119,561 119,561 7.0% (8,249) 0 0 $7.12 Scottsdale Airpark Ind 289 5,117,341 788,690 821,596 16.1% (175,320) 0 0 $10.69 Scottsdale/Salt River Ind 92 3,668,979 387,184 466,786 12.7% (185,250) 0 0 $11.57 SW N of Buckeye Road Ind 619 30,203,009 4,116,784 4,380,558 14.5% (990,050) 0 0 $4.58 SW S of Buckeye Road Ind 214 11,090,692 2,523,612 2,652,112 23.9% (324,770) 0 0 $4.83 Tempe East Ind 336 5,736,517 411,098 411,098 7.2% (163,830) 0 0 $8.10 Tempe Northwest Ind 287 9,588,281 1,019,006 1,031,231 10.8% 36,174 0 0 $10.50 Tempe Southwest Ind 498 17,588,629 1,912,309 2,266,203 12.9% (626,398) 0 0 $6.47 Tolleson Ind 190 23,182,573 5,031,496 5,081,107 21.9% 468,657 60,000 1,949,401 $4.67 W Phx N of Thomas Rd Ind 445 7,937,854 926,106 926,106 11.7% (438,438) 0 0 $6.19 W Phx S of Thomas Rd Ind 300 6,426,200 608,356 645,799 10.0% (266,960) 0 0 $5.57 Totals 8,349 249,211,833 37,187,715 39,288,336 15.8% (4,771,100) 304,203 2,314,489 $6.50 Existing Inventory Vacancy 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 11
PHOENIX MID-YEAR 2009 FIGURES AT A GLANCE Total Industrial Submarket Statistics Mid-Year 2009 YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Central Phoenix Ind 266 3,832,051 368,257 368,257 9.6% (21,924) 0 0 $10.83 Chandler Airport Ind 64 1,866,960 655,952 655,952 35.1% 343,232 288,000 0 $10.58 Chandler Ind 359 17,334,768 1,654,194 1,767,386 10.2% (19,636) 22,782 0 $10.25 Chandler N/Gilbert Ind 711 15,621,532 3,439,547 3,620,416 23.2% (539,718) 130,483 0 $7.92 Deer Vly/Pinnacle Pk Ind 600 15,256,664 1,908,243 2,008,360 13.2% (184,194) 134,914 24,111 $9.71 Falcon Fld/Apache Jct Ind 196 4,333,265 645,011 714,994 16.5% 58,070 98,730 0 $9.43 Glendale Ind 84 3,517,876 1,729,379 1,732,379 49.2% (109,082) 0 0 $5.27 Goodyear Ind 118 8,079,656 2,258,395 2,258,395 28.0% (77,835) 0 306,977 $5.02 Grand Avenue Ind 600 12,802,228 1,397,888 1,397,888 10.9% (229,188) 0 0 $5.85 Mesa Ind 448 6,628,649 1,429,952 1,456,096 22.0% (148,575) 0 0 $7.35 N Glendale/Sun City Ind 139 3,339,310 1,019,683 1,031,683 30.9% 70,294 0 0 $9.83 North Airport Ind 521 13,475,911 1,553,781 1,884,987 14.0% (388,914) 0 34,000 $8.80 North Black Canyon Ind 246 4,557,339 598,148 598,148 13.1% (114,840) 0 0 $8.82 S Airport N of Roeser Ind 482 13,701,812 1,628,217 1,906,313 13.9% (400,399) 0 0 $8.25 S Airport S of Roeser Ind 160 4,340,793 664,903 673,329 15.5% 51,440 0 0 $8.49 SC N of Salt River Ind 625 17,159,877 1,975,040 2,122,091 12.4% (222,190) 0 0 $6.61 SC S of Salt River Ind 105 1,755,409 119,561 119,561 6.8% (8,249) 0 0 $7.12 Scottsdale Airpark Ind 385 7,623,308 1,354,569 1,422,880 18.7% (293,885) 0 0 $12.03 Scottsdale/Salt River Ind 151 5,131,268 740,758 831,407 16.2% (300,304) 0 0 $12.60 SW N of Buckeye Road Ind 630 30,425,832 4,116,784 4,380,558 14.4% (990,050) 0 0 $4.58 SW S of Buckeye Road Ind 225 11,681,471 2,523,612 2,652,112 22.7% (324,770) 0 0 $4.83 Tempe East Ind 379 6,886,074 510,056 510,056 7.4% (175,047) 0 0 $9.11 Tempe Northwest Ind 353 11,541,428 1,463,548 1,483,373 12.9% 9,004 67,365 0 $10.74 Tempe Southwest Ind 601 22,285,725 2,387,722 2,806,440 12.6% (659,768) 0 0 $7.66 Tolleson Ind 198 23,575,197 5,213,280 5,262,891 22.3% 469,367 60,000 1,949,401 $4.79 W Phx N of Thomas Rd Ind 490 8,625,129 1,090,491 1,090,491 12.6% (460,758) 0 0 $6.27 W Phx S of Thomas Rd Ind 313 6,632,869 614,356 651,799 9.8% (271,460) 0 0 $5.57 Totals 9,449 282,012,401 43,061,327 45,408,242 16.1% (4,939,379) 802,274 2,314,489 $7.08 Existing Inventory Vacancy 12 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
FIGURES AT A GLANCE MID-YEAR 2009 PHOENIX Flex Market Statistics Mid-Year 2009 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2009 1,100 32,800,568 5,873,612 6,119,906 18.7% (252,902) 4 68,099 0 0 $12.47 2009 1,096 32,732,469 5,500,933 5,798,905 17.7% 84,623 9 429,972 4 68,099 $13.22 2008 1,087 32,302,497 5,149,220 5,453,556 16.9% (179,268) 3 80,379 13 498,071 $13.18 2008 1,084 32,222,118 4,955,901 5,193,909 16.1% (359,044) 9 268,140 12 510,351 $14.04 2008 1,075 31,953,978 4,169,026 4,566,725 14.3% 203,422 10 337,929 21 778,491 $14.30 2008 1,065 31,616,049 4,027,698 4,432,218 14.0% 169,248 4 139,299 25 968,676 $13.96 2007 1,061 31,476,750 4,098,180 4,462,167 14.2% (269,090) 7 271,456 17 773,627 $13.76 2007 1,054 31,205,294 3,675,512 3,921,621 12.6% 311,126 3 145,335 20 910,636 $13.95 2007 1,052 31,259,959 4,002,235 4,287,412 13.7% 333,383 9 234,411 14 516,857 $13.72 2007 1,044 31,247,308 4,264,259 4,608,144 14.7% 176,963 7 233,001 16 584,411 $13.16 2006 1,038 31,095,857 4,099,501 4,633,656 14.9% 1,137,598 57 1,528,053 19 646,928 $12.72 2005 981 29,567,804 3,822,024 4,243,201 14.4% 1,815,640 35 906,639 43 1,052,468 $11.35 2004 946 28,661,165 4,753,887 5,152,202 18.0% 1,009,286 27 684,565 27 617,510 $10.43 2003 919 27,976,600 5,224,594 5,476,923 19.6% 949,233 15 817,750 20 577,032 $10.03 2002 904 27,158,850 5,094,331 5,608,406 20.7% (298,767) 21 810,051 7 675,674 $11.00 2001 883 26,348,799 4,007,353 4,499,588 17.1% 278,991 33 1,514,096 17 647,040 $10.97 Quoted Warehouse Market Statistics Mid-Year 2009 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2009 8,349 249,211,833 37,187,715 39,288,336 15.8% (2,742,544) 6 194,642 5 2,314,489 $6.50 2009 8,343 249,017,191 34,451,445 36,351,150 14.6% (2,028,556) 3 109,561 10 2,485,020 $6.61 2008 8,340 248,907,630 32,875,860 34,213,033 13.7% (905,822) 27 1,384,125 11 2,274,091 $6.98 2008 8,314 247,541,566 30,819,905 31,941,147 12.9% 431,765 43 2,180,325 32 1,573,892 $7.08 2008 8,271 245,361,241 29,248,412 30,192,587 12.3% (1,906,412) 40 3,646,493 57 3,215,475 $7.18 2008 8,231 241,714,748 24,032,651 24,639,682 10.2% 154,625 62 3,110,492 91 6,586,715 $7.27 2007 8,169 238,604,256 21,121,140 21,683,815 9.1% (53,748) 54 3,108,778 121 8,326,895 $7.23 2007 8,115 235,495,478 17,877,477 18,521,289 7.9% 1,105,997 40 1,158,031 164 10,864,633 $7.21 2007 8,076 234,418,447 17,735,386 18,550,255 7.9% 2,152,636 55 3,022,212 141 10,093,937 $7.03 2007 8,021 231,396,235 16,949,897 17,680,679 7.6% 870,325 58 2,556,803 147 9,265,006 $7.23 2006 7,965 229,048,079 15,423,393 16,202,848 7.1% 4,503,854 182 6,204,111 146 8,793,446 $6.86 2005 7,787 223,118,608 14,064,013 14,777,231 6.6% 8,691,654 126 4,813,210 144 4,163,304 $6.33 2004 7,667 218,406,348 18,145,367 18,756,625 8.6% 6,002,081 140 4,074,334 72 3,360,495 $5.84 2003 7,533 215,727,854 20,772,944 22,080,212 10.2% 1,290,589 86 2,716,920 76 2,132,448 $6.53 2002 7,447 213,010,934 18,673,685 20,653,881 9.7% 624,772 80 4,079,245 57 2,054,225 $5.99 2001 7,374 209,052,162 15,836,955 17,319,881 8.3% 3,337,920 114 5,843,484 67 4,045,526 $6.05 Quoted Total Industrial Market Statistics Mid-Year 2009 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2009 9,449 282,012,401 43,061,327 45,408,242 16.1% (2,995,446) 10 262,741 5 2,314,489 $7.08 2009 9,439 281,749,660 39,952,378 42,150,055 15.0% (1,943,933) 12 539,533 14 2,553,119 $7.26 2008 9,427 281,210,127 38,025,080 39,666,589 14.1% (1,085,090) 30 1,464,504 24 2,772,162 $7.65 2008 9,398 279,763,684 35,775,806 37,135,056 13.3% 72,721 52 2,448,465 44 2,084,243 $7.84 2008 9,346 277,315,219 33,417,438 34,759,312 12.5% (1,702,990) 50 3,984,422 78 3,993,966 $8.05 2008 9,296 273,330,797 28,060,349 29,071,900 10.6% 323,873 66 3,249,791 116 7,555,391 $8.15 2007 9,230 270,081,006 25,219,320 26,145,982 9.7% (322,838) 61 3,380,234 138 9,100,522 $8.10 2007 9,169 266,700,772 21,552,989 22,442,910 8.4% 1,417,123 43 1,303,366 184 11,775,269 $8.10 2007 9,128 265,678,406 21,737,621 22,837,667 8.6% 2,486,019 64 3,256,623 155 10,610,794 $7.88 2007 9,065 262,643,543 21,214,156 22,288,823 8.5% 1,047,288 65 2,789,804 163 9,849,417 $8.14 2006 9,003 260,143,936 19,522,894 20,836,504 8.0% 5,641,452 239 7,732,164 165 9,440,374 $7.81 2005 8,768 252,686,412 17,886,037 19,020,432 7.5% 10,507,294 161 5,719,849 187 5,215,772 $7.25 2004 8,613 247,067,513 22,899,254 23,908,827 9.7% 7,011,367 167 4,758,899 99 3,978,005 $6.85 2003 8,452 243,704,454 25,997,538 27,557,135 11.3% 2,239,822 101 3,534,670 96 2,709,480 $7.28 2002 8,351 240,169,784 23,768,016 26,262,287 10.9% 326,005 101 4,889,296 64 2,729,899 $6.48 2001 8,257 235,400,961 19,844,308 21,819,469 9.3% 3,616,911 147 7,357,580 84 4,692,566 $6.54 Quoted 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 13
PHOENIX MID-YEAR 2009 LEASING ACTIVITY Leasing Highlights in Select CoStar Markets Color Coded by Vacancy Rate 14 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
LEASING ACTIVITY MID-YEAR 2009 PHOENIX Historical Rental Rates Based on Quoted Rental Rates $16.00 Flex Warehouse Total Market $14.00 $12.00 Dollars/SF/Year $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 2007 2007 2008 2008 2008 2008 2009 2009 Vacancy by Available Space Type Vacancy by Building Type Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Building Type Phoenix United States Phoenix United States 5% 5% 13% 14% 87% 86% 95% 95% Direct Sublet Direct Sublet Flex Warehouse Flex Warehouse U.S. Rental Rate Comparison Based on Average Quoted Rental Rates Future Space Available Space Scheduled to be Available for Occupancy* $9.00 $8.00 $7.00 Phoenix United States 2.5 2.0 2.1 Dollars/SF/Year $6.00 $5.00 $4.00 $3.00 Millions 1.5 1.0 1.3 $2.00 0.5 $1.00 $0.00 2007 2007 2008 2008 2008 2008 2009 2009 0.0 0.1 0.0 0.0 0.0 2009 2009 2010 2010 2010 2010 * Includes Under Construction Space 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 15
PHOENIX MID-YEAR 2009 LEASING ACTIVITY Select Top Industrial Leases Based on Leased Square Footage For Deals Signed in 2009 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 602 S 63rd Ave* SW N of Buckeye Road Ind 168,165 1st Office Depot Business Services Division Direct Deal Direct Deal 2 2225 S 43rd Ave* SW S of Buckeye Road Ind 116,538 1st Olympian Worldwide Moving & Storage Direct Deal CB Richard Ellis 3 801 S 75th Ave Tolleson Ind 97,425 2nd Tyco CB Richard Ellis CB Richard Ellis 4 344 N McKemy Ave* Chandler Ind 74,000 1st Sound Packaging LLC Direct Deal Cutler Commercial 5 1502 E Hadley St SC N of Salt River Ind 69,809 1st Case Furniture and Design Industrial Property Specialist Harrison Properties 6 4805 E Thistle Landing Dr* Chandler Ind 65,645 1st Alltel Site Selection Group LLC Principle Equity Investments 7 18 N 57th Dr SW N of Buckeye Road Ind 53,592 2nd OMCO Solar Colliers International Lee & Associates 8 3330 W Cocopah St* SW S of Buckeye Road Ind 53,000 1st Phoenix Packaging Direct Deal Harrison Properties 9 411 E Ray Rd Chandler N/Gilbert Ind 46,000 2nd 19th Hole Cart s Trust Realty Advisors, Inc. DAUM Commercial Real Estate Service 10 860 W Carver Rd Tempe Southwest Ind 45,228 1st PODS Cushman & Wakefield, Inc. Cushman & Wakefield, Inc. 11 4707 W Van Buren St* SW N of Buckeye Road Ind 40,541 1st Cruse Marketing Direct Deal Direct Deal 12 2626 S 7th St SC N of Salt River Ind 40,000 1st ABC Bottling Grubb & Ellis BRE Commercial LLC CB Richard Ellis 13 1511 S 47th Ave SW S of Buckeye Road Ind 38,988 1st Archive Systems Direct Deal CB Richard Ellis 14 4445 E Elwood St North Airport Ind 37,522 1st Maintenance Supply Headquarters Colliers International Lee & Associates 15 655 W Elliot Tempe Southwest Ind 35,000 1st Bunzl Colliers International Lee & Associates 16 1430 E Hadley St SC N of Salt River Ind 30,698 2nd PCCP DCP Hotel Phoenix CB Richard Ellis Harrison Properties 17 5330 E Washington St Tempe Northwest Ind 30,000 1st Kiewit Lee & Associates CB Richard Ellis 18 10115 W Van Buren St Tolleson Ind 28,330 2nd Nelson Corporation Grubb & Ellis BRE Commercial LLC CB Richard Ellis 19 945 W Deer Valley Rd Deer Vly/Pinnacle Pk Ind 28,000 1st IES Commercial, Inc. Mohr Partners Shell Commercial 20 302 E University Dr SC N of Salt River Ind 27,534 2nd Goodman s Direct Deal ProLogis 21 3618 E La Salle St S Airport S of Roeser Ind 27,500 1st Apria Healthcare Corporate Realty Associates, Inc. Lee & Associates 22 2629 E Rose Garden Ln Central Phoenix Ind 27,000 1st Athletes Performance ProStar Realty Lee & Associates 23 308 S Extension Rd Mesa Ind 26,664 2nd Bullseye Wholesale LLC Direct Deal Direct Deal 24 3130 N Oakland Falcon Fld/Apache Jct Ind 26,600 2nd Phoenix Heliparts Grubb & Ellis BRE Commercial LLC Grubb & Ellis BRE Commercial LLC 25 1740 S 40th Ave SW S of Buckeye Road Ind 26,476 1st Southwest Transfer Industrial Property Specialist Colliers International 26 5670 S 40th St S Airport S of Roeser Ind 26,469 2nd G Tech Corp. NAI Horizon Arizona Industrial Properties 27 875 W Elliot Rd Tempe Southwest Ind 25,000 2nd University of Phoenix CB Richard Ellis Thompson National 28 3636 W Buckeye Rd* SW N of Buckeye Road Ind 24,500 1st Razor Wire International LLC N/A Cutler Commercial 29 1310 W Drivers Way Tempe Southwest Ind 23,765 1st Supplement & Nutrition Technologies DAUM Commercial Real Estate Service DAUM Commercial Real Estate Service 30 1626 S 51st Ave SW S of Buckeye Road Ind 23,200 2nd R & S Mattress Liquidators N/A Harrison Properties 31 2201-2219 E University Dr* S Airport N of Roeser Ind 23,123 2nd Steven Woods Printing Direct Deal Cutler Commercial 32 1625 E Weber Dr* Tempe East Ind 22,685 1st Evolution Motorsports N/A Ross Property Advisors 33 8399 W Van Buren St Tolleson Ind 22,550 2nd Logistic Solutions Cushman & Wakefield, Inc. Cushman & Wakefield, Inc. 34 3011 S 52nd St Tempe Southwest Ind 21,630 1st ADT Security Services, Inc. CB Richard Ellis Grubb & Ellis BRE Commercial LLC 35 1430 E Hadley St SC N of Salt River Ind 21,179 2nd National Office Liquidators Landmark TCN Harrison Properties 36 4102 E Elwood St North Airport Ind 20,232 2nd A & A Specialty Products LLC DAUM Commercial Real Estate Service DAUM Commercial Real Estate Service 37 3130 N Oakland Falcon Fld/Apache Jct Ind 20,000 1st SolFocus, Inc. Jones Lang LaSalle Grubb & Ellis BRE Commercial LLC 38 2201-2219 E University Dr* S Airport N of Roeser Ind 20,000 2nd Com Tec Printing & Graphics, Inc. Direct Deal Cutler Commercial 39 1051 N Fiesta Blvd Chandler N/Gilbert Ind 19,744 1st OEM Group Grubb & Ellis BRE Commercial LLC Mandelbaum Commercial Real Estate 40 7815 S Hardy Dr Tempe Southwest Ind 19,328 1st Action Industries CB Richard Ellis CB Richard Ellis * Renewal 16 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
SALES ACTIVITY MID-YEAR 2009 PHOENIX The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 9.0% Cap Rate Price/SF $300 Cap Rate Percentage 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% $250 $200 $150 $100 $50 Dollars/SF 0.0% 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 $0 Source: CoStar COMPS Sales Volume & Price Sales Analysis by Building Size Based on Industrial Building Sales of 15,000 SF and Larger Based on Industrial Bldg Sales From April 2008 - March 2009 Sales Volume Price/SF Bldg Size # RBA $ Volume Price/SF Cap Rate $500 $120 Millions of Sales Volume Dollars $450 $400 $350 $300 $250 $200 $150 $100 $50 $100 $80 $60 $40 $20 Price/SF < 25,000 SF 250 2,079,954 $ 271,226,852 $ 130.40 7.40% 25K-99K SF 48 2,342,008 $ 195,073,165 $ 83.29 7.33% 100K-249K SF 12 1,646,585 $ 143,708,934 $ 87.28 8.36% $0 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 $0 >250K SF 5 1,989,088 $ 124,974,520 $ 62.83 6.40% Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Industrial Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Industrial Building Sales of 15,000 SF and Larger $120 Phoenix US 10.0% Phoenix US Dollars per SF $100 $80 $60 $40 $20 Cap Rate Percentage 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% $0 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 0.0% 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 Source: CoStar COMPS Source: CoStar COMPS 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 17
PHOENIX MID-YEAR 2009 SALES ACTIVITY 18 THE COSTAR INDUSTRIAL REPORT 2009 COSTAR GROUP, INC.
SALES ACTIVITY MID-YEAR 2009 PHOENIX Select Land Sales Based on Industrial Zoned Land Sales Occurring From April 2008 - June 2009 SW Washington St & 48th St, Phoenix NE Buckeye Rd & 51st Ave, Phoenix NE Broadway Rd & 36th St, Phoenix Sale Price: $13,318,750 Sale Price: $12,250,000 Sale Price: $7,725,000 Acres: 16.15 Acres: 36.25 Acres: 16.55 Price/SF: $18.93 Price/SF: $7.76 Price/SF: $10.71 Closing Date: 11/12/2008 Closing Date: 04/10/2008 Closing Date: 10/07/2008 Zoning: A-2, Phoenix Zoning: A-2 Zoning: IND PK, Phoenix Intended Use: Hold for Investment Intended Use: Auto Salvage Facility Intended Use: Industrial Buyer: Lincoln Realty Capital Corporation Buyer: Copart, Inc. Buyer: Reliance Management LLC Seller: Lauth Property Group Seller: Portco LLC Seller: Merrihill, Ltd. SWC Cactus & Dysart, El Mirage NE 65th Ave & Buckeye Rd, Phoenix SW Cactus Rd & Dysart Rd, Surprise Sale Price: $4,696,814 Sale Price: $2,447,488 Sale Price: $2,195,424 Acres: 81.05 Acres: 11.22 Acres: 8.40 Price/SF: $1.33 Price/SF: $5.01 Price/SF: $6.00 Closing Date: 06/12/2009 Closing Date: 11/05/2008 Closing Date: 07/07/2008 Zoning: I-1, C-BP, PAD Zoning: A-1, Phoenix Zoning: BP, Surprise Intended Use: Industrial Intended Use: Industrial Intended Use: Industrial Buyer: Silagi Development Buyer: Chamberlain Development Company LLC Buyer: Biltmore LGE Skyway Surprise LLC Seller: National Bank of Arizona Seller: 1600 Broadway LLC Seller: Skyway Business Park II LLC Source: CoStar COMPS 2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 19