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Phoenix Industrial MarketY E A R - E N D 2 0 0 8

The CoStarIndustrial Report

Phoenix Industrial Market

©2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT A

YEAR-END 2008 – PHOENIX

Table of ContentsTable of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A

Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B

Terms & Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C

Market Highlights & Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

CoStar Markets & Submarkets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Employment & Tenant Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Employment & Unemployment Analysis

Inventory & Development Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Construction Activity MapInventory & Development AnalysisSelect Top DeliveriesSelect Top Under Construction Properties

Figures at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Figures at a Glance by Building Type & MarketFigures at a Glance by Building Type & SubmarketHistorical Figures at a Glance

Leasing Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Leasing Activity MapLeasing Activity AnalysisSelect Top Lease Transactions

Sales Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Sales Activity AnalysisSelect Top Sales TransactionsSelect Same Building SalesSelect Land Sales

Analysis of Individual CoStar Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Airport MarketNortheast MarketNorthwest MarketSoutheast MarketSouthwest Market


B THE COSTAR INDUSTRIAL REPORT ©2009 COSTAR GROUP, INC.

PHOENIX – YEAR-END 2008


©2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT C


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.

© 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

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


B THE COSTAR INDUSTRIAL REPORT ©2009 COSTAR GROUP, INC.



©2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT C


Terms & DefinitionsAvailability 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 ten-ant. 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 pur-chased a commercial real estate asset.

Cap Rate: Short for capitalization rate. The Cap Rate is a calcula-tion 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 archi-tectural 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 fit-tings. 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 typical-ly 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 gener-ally 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 entrepre-neurial 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 typi-cal 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 pri-mary purpose of the space is for storing, producing, assembling, or distributing product.

Landlord Rep: (Landlord Representative) In a typical lease trans-action 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 commit-ted 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 building-type specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundar-ies of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets)


D THE COSTAR INDUSTRIAL REPORT ©2009 COSTAR GROUP, INC.

PHOENIX – YEAR-END 2008 YEAR-END 2008 – PHOENIX


©2009 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 1

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 manufactur-ing, 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 vari-ous 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 par-ticular 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 eco-nomic 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 hall-ways, 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 build-ings in a given time period.

Seller: The individual, group, company, or entity that sells a par-ticular 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 delin-eate 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 metro-politan 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 construc-tion 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 avail-able. 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 con-sidered 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 what-ever time period is being studied.


D THE COSTAR INDUSTRIAL REPORT ©2009 COSTAR GROUP, INC.

PHOENIX – YEAR-END 2008 YEAR-END 2008 – PHOENIX



OVERVIEW

Phoenix’s Vacancy Increases to 14.3% Net Absorption Negative (1,300,394) SF in the Quarter

The Phoenix Industrial market ended the fourth quarter 2008 with a vacancy rate of 14.3%. The vacancy rate was up over the previous quarter, with net absorption

totaling negative (1,300,394) square feet in the fourth quarter. Vacant sublease space increased in the quarter, ending the quarter at 1,484,792 square feet. Rental rates ended the fourth quarter at $7.73, a decrease over the previous quarter. A total of 21 build-ings delivered to the market in the quarter totaling 1,167,532 square feet, with 2,176,502 square feet still under construction at the end of the quarter.

AbsorptionNet absorption for the overall Phoenix Industrial market

was negative (1,300,394) square feet in the fourth quarter 2008. That compares to positive 149,154 square feet in the third quarter 2008, negative (1,525,818) square feet in the second quarter 2008, and negative (70,834) square feet in the first quarter 2008.

The Flex building market recorded net absorption of nega-tive (174,382) square feet in the fourth quarter 2008, compared to negative (381,547) square feet in the third quarter 2008, posi-tive 139,739 in the second quarter 2008, and positive 128,090 in the first quarter 2008.

The Warehouse building market recorded net absorption of negative (1,126,012) square feet in the fourth quarter 2008 com-pared to positive 530,701 square feet in the third quarter 2008, negative (1,665,557) in the second quarter 2008, and negative (198,924) in the first quarter 2008.

VacancyThe Industrial vacancy rate in the Phoenix market area

increased to 14.3% at the end of the fourth quarter 2008. The vacancy rate was 13.5% at the end of the third quarter 2008, 13.1% at the end of the second quarter 2008, and 10.9% at the end of the first quarter 2008.

Flex projects reported a vacancy rate of 17.5% at the end of the fourth quarter 2008, 16.8% at the end of the third quarter 2008, 14.9% at the end of the second quarter 2008, and 14.4% at the end of the first quarter 2008.

Warehouse projects reported a vacancy rate of 13.9% at the end of the fourth quarter 2008, 13.1% at the end of third quarter 2008, 12.5% at the end of the second quarter 2008, and 10.4% at the end of the first quarter 2008.

Largest Lease SigningsThe largest lease signings occurring in 2008 included: the

512,780-square-foot lease signed by Amazon.com at 16920 W Commerce Ln. in the Southwest market; the 355,200-square-foot deal signed by Orbital Sciences Corporation at 3380 S Price Rd. in the Southeast market; and the 323,346-square-foot lease signed by aspenhome at 601 N 75th Ave. in the Southwest market.

Sublease VacancyThe amount of vacant sublease space in the Phoenix mar-

ket increased to 1,484,792 square feet by the end of the fourth quarter 2008, from 1,230,750 square feet at the end of the third quarter 2008. There was 1,341,874 square feet vacant at the end of the second quarter 2008 and 1,011,551 square feet at the end of the first quarter 2008.

Phoenix’s Flex projects reported vacant sublease space of 317,682 square feet at the end of fourth quarter 2008, up from

Vacancy Rates by Building Type 1999-2008

Source: CoStar Property®

Absorption & Deliveries U.S. Vacancy ComparisonPast 10 Quarters Past 10 Quarters

Source: CoStar Property• Source: CoStar Property•

0%

5%

10%

15%

20%

25%

19991q

19993q

20001q

20003q

20011q

20013q

20021q

20023q

20031q

20033q

20041q

20043q

20051q

20053q

20061q

20063q

20071q

20073q

20081q

20083q

Vac

ancy

Rat

e

Flex Warehouse Total Market

2.9

(0.6)

1.1

2.4

1.4

(0.3)(0.1)

(1.5)

0.1

(1.3)

1.2

2.7 2.8

3.3

1.3

3.43.0

4.0

2.5

1.2

(2.0)

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

20063q

20064q

20071q

20072q

20073q

20074q

20081q

20082q

20083q

20084q

Millio

ns

SF

Net Absorption Deliveries

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

20063q

20064q

20071q

20072q

20073q

20074q

20081q

20082q

20083q

20084q

Vac

ancy

Rat

e

Phoenix United States

2 THE COSTAR INDUSTRIAL REPORT ©2009 COSTAR GROUP, INC.


Phoenix Industrial MarketYEAR-END 2008 – PHOENIX



OVERVIEW

the 238,008 square feet reported at the end of the third quarter 2008. There were 406,125 square feet of sublease space vacant at the end of the second quarter 2008, and 412,946 square feet at the end of the first quarter 2008.

Warehouse projects reported increased vacant sublease space from the third quarter 2008 to the fourth quarter 2008. Sublease vacancy went from 992,742 square feet to 1,167,110 square feet during that time. There was 935,749 square feet at the end of the second quarter 2008, and 598,605 square feet at the end of the first quarter 2008.

Rental RatesThe average quoted asking rental rate for available Industrial

space was $7.73 per square foot per year at the end of the fourth quarter 2008 in the Phoenix market area. This represented a 0.9% decrease in quoted rental rates from the end of the third quarter 2008, when rents were reported at $7.80 per square foot.

The average quoted rate within the Flex sector was $13.32 per square foot at the end of the fourth quarter 2008, while Warehouse rates stood at $7.03. At the end of the third quarter 2008, Flex rates were $14.16 per square foot, and Warehouse rates were $7.02.

Deliveries and ConstructionDuring the fourth quarter 2008, 21 buildings totaling

1,167,532 square feet were completed in the Phoenix market area. This compares to 54 buildings totaling 2,521,078 square feet that were completed in the third quarter 2008, 50 buildings totaling 3,975,813 square feet completed in the second quarter 2008, and 3,032,197 square feet in 61 buildings completed in the first quarter 2008.

There were 2,176,502 square feet of Industrial space under construction at the end of the fourth quarter 2008.

Some of the notable 2008 deliveries include: Riverside Ind. Center - II & III, a 1,207,021-square-foot facility that delivered

in second quarter 2008 and is now 0% occupied, and Fowler Distribution Center - Bldg 1, a 575,074-square-foot building that delivered in second quarter 2008 and is now 0% occupied.

The largest projects underway at the end of fourth quarter 2008 were Fowler Distribution Center - Bldg 2, a 1,267,110-square-foot building with 0% of its space pre-leased, and 202 Business Park - Bldg 596, an 88,775-square-foot facility that is 0% pre-leased.

InventoryTotal Industrial inventory in the Phoenix market area

amounted to 278,296,840 square feet in 9,161 buildings as of the end of the fourth quarter 2008. The Flex sector consisted of 32,406,885 square feet in 1,090 projects. The Warehouse sector consisted of 245,889,955 square feet in 8,071 buildings. Within the Industrial market there were 1,806 owner-occupied buildings accounting for 63,109,461 square feet of Industrial space.

Sales ActivityTallying industrial building sales of 15,000 square feet

or larger, Phoenix industrial sales figures rose during the third quarter 2008 in terms of dollar volume compared to the second quarter of 2008.

In the third quarter, 33 industrial transactions closed with a total volume of $202,248,738. The 33 buildings totaled 2,306,162 square feet and the average price per square foot equated to $87.70 per square foot. That compares to 32 trans-actions totaling $176,009,365 in the second quarter. The total square footage was 2,426,126 for an average price per square foot of $72.55.

Total year-to-date industrial building sales activity in 2008 is down compared to the previous year. In the first nine months of 2008, the market saw 112 industrial sales transactions with a total volume of $763,293,479. The price per square foot has aver-aged $78.84 this year. In the first nine months of 2007, the market posted 205 transactions with a total volume of $1,180,288,363. The price per square foot averaged $99.75.

Cap rates have been higher in 2008, averaging 6.96%, com-pared to the first nine months of last year when they averaged 6.70%.

One of the largest transactions that has occurred within the last four quarters in the Phoenix market is the sale of Avnet Inc. in Chandler. This 228,086 square foot industrial building sold for $35,200,000, or $154.33 per square foot. The property sold on 7/25/08, at a 6.99% cap rate.

Reports compiled by: Adam Jarrett, CoStar Property® Research Manager; Tom Summers, CoStar COMPS® Research Manager.

Vacancy Rates by Building Type 1999-2008


Absorption & Deliveries U.S. Vacancy ComparisonPast 10 Quarters Past 10 Quarters

Source: CoStar Property• Source: CoStar Property•

0%

5%

10%

15%

20%

25%

19991q

19993q

20001q

20003q

20011q

20013q

20021q

20023q

20031q

20033q

20041q

20043q

20051q

20053q

20061q

20063q

20071q

20073q

20081q

20083q

Vac

ancy

Rat

e


2.9

(0.6)

1.1

2.4

1.4

(0.3)(0.1)

(1.5)

0.1

(1.3)

1.2

2.7 2.8

3.3

1.3

3.43.0

4.0

2.5

1.2

(2.0)

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

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Millio

ns

SF

Net Absorption Deliveries

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

20063q

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Vac

ancy

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e







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

Markets Submarkets

Airport Ind North Airport IndS Airport N of Roeser IndS Airport S of Roeser IndSC N of Salt River IndSC S of Salt River Ind

Northeast Ind Central Phoenix IndScottsdale Airpark IndScottsdale/Salt River Ind

Northwest Ind Deer Vly/Pinnacle Pk IndGlendale IndGrand Avenue IndN Glendale/Sun City IndNorth Black Canyon IndW Phx N of Thomas Rd IndW Phx S of Thomas Rd Ind

Southeast Ind Chandler Airport IndChandler IndChandler N/Gilbert IndFalcon Fld/Apache Jct IndMesa IndTempe East IndTempe Northwest IndTempe Southwest Ind

Southwest Ind Goodyear IndSW N of Buckeye Road IndSW S of Buckeye Road IndTolleson Ind






Total Employment by Industry Total Employment GrowthPercent of Total Employment by Industry Total Number of Jobs Added Per Year

Source: Department of Labor, Bureau of Labor Statistics Source: Department of Labor, Bureau of Labor Statistics

Total Employment Growth Industrial* Employment GrowthCumulative Growth in Jobs Over the Past 5 Years Number of Industrial* Jobs Added Per Year

MarketEmployment

GrowthInventory Growth Difference

Atlanta 8.60% 8.00% 0.60%

Chicago 4.10% 6.30% -2.20%

Dallas/Ft Worth 6.70% 7.80% -1.10%

Denver 6.70% 4.50% 2.20%

Detroit -4.20% 1.80% -6.00%

Houston 10.00% 7.80% 2.20%

Inland Empire (California) 6.20% 25.50% -19.30%

Los Angeles 2.00% 2.30% -0.30%

Northern New Jersey 3.90% 3.60% 0.30%

Pittsburgh 2.30% 1.50% 0.80%

Phoenix 12.30% 14.10% -1.80%

Source: Department of Labor, Bureau of Labor Statistics

Historical Unemployment Rates

Source: Department of Labor, Bureau of Labor Statistics

Source: Department of Labor, Bureau of Labor Statistics. * Industrial employment is defined as jobs in the

Manufacturing, and Trade, Transportation & Utilities industries

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2004 2005 2006 2007 2008

Perc

ent

Gro

wth

Phoenix U.S. Average

12%

10%

4%

13%

0%

17%

7%

20%

2%

8%

7%Natural Resources &MiningConstruction

Manufacturing

Trade, Transportation &UtilitiesInformation

Financial Activities

Professional & BusinessServicesEducation & HealthServicesLeisure & Hospitality

Other Services

Government

-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%

2004 2005 2006 2007 2008

Perc

ent

Gro

wth


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2004 1q 2004 2q 2004 3q 2004 4q 2005 1q 2005 2q 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q

Perc

ent

Unem

plo

yment


EMPLOYMENT AND TENANT






Construction Highlights in Select CoStar MarketsColor Coded by Under Construction Square Footage as a Percentage of Existing Inventory

INVENTORY & DEVELOPMENT

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Historical Deliveries 1982 - 2008

Source: CoStar Property® * Future deliveries based on current under construction buildings.

Construction Activity Markets Ranked by Under Construction RBA

# Bldgs Preleased SF Preleased % All Existing U/C

Southwest Ind 2 64,600 4.8% 64,618 676,055

Southeast Ind 21 28,470 4.7% 27,979 29,025

Northwest Ind 8 64,696 30.1% 22,366 26,858

Airport Ind 0 0 0.0% 27,418 0

Northeast Ind 0 0 0.0% 21,429 0

Totals 31 157,766 7.2% 30,378 70,210


Recent Deliveries Future Deliveries Leased & Un-Leased SF in Deliveries Since 2004 Preleased & Un-Leased SF in Properties Scheduled to Deliver

Source: CoStar Property® Source: CoStar Property®

Market

Under Construction Inventory Average Bldg Size

Total RBA

1,352,110

2,176,502

609,527

214,865

0

0

5.9

5.0

6.5

11.6 11.9

10.8

6.5

4.9

3.13.8

1.5

3.73.0

6.1

7.4

8.69.3

7.7 7.4 7.5

5.1

3.5

5.1

6.1

7.8

10.9 10.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

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

Millio

ns

of

SF

Deliveries Average Delivered SF

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2004 2005 2006 2007 2008

Millio

ns

of

SF

Leased Un-Leased

0

200

400

600

800

1,000

1,200

1,400

2009 1q 2009 2q 2009 3q 2009 4q

T

Thousa

nds

of

SF

Preleased Un-Leased







Historical Construction Starts & DeliveriesSquare Footage Per Quarter Starting and Completing Construction


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 145 3,199,265 536,924 16.8% $10.16 334,888 2,864,377

50,000 SF - 99,999 SF 34 2,335,181 386,859 16.6% $9.77 292,888 2,042,293

100,000 SF - 249,999 SF 8 1,194,123 342,014 28.6% $7.37 373,618 820,505

250,000 SF - 499,999 SF 5 1,847,003 175,140 9.5% $4.59 0 1,847,003

>= 500,000 SF 3 2,294,875 512,780 22.3% $4.50 0 2,294,875


Recent Development by Tenancy Existing Inventory ComparisonBased on RBA Developed for Single & Multi-Tenant Use Based on Total RBA

2008 Deliveries


Currently Under Construction By Building Type By Tenancy Type

1.3

2.1

1.6

2.0

4.1

2.0 1.9

4.0

3.2

3.9

2.1

0.7

1.81.7

0.7

0.0

1.0

1.7

0.7

2.3

1.3

2.6

1.2

2.72.8

3.3

1.3

3.4

3.0

4.0

2.5

1.2

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2005 1q 2005 2q 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q

Millio

ns

of

SF

Construction Starts Deliveries

34%

66%

Multi Single

9%

91%

Multi Single

12%

88%

Flex Warehouse

41%

59%

Multi Single







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Flex Market Statistics Year-End 2008

YTD Net YTD Under Quoted

Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates

Airport Ind 152 5,559,008 818,887 844,402 15.2% (156,287) 0 0 $13.63

Northeast Ind 193 4,506,498 745,778 782,177 17.4% (25,794) 49,961 0 $16.44

Northwest Ind 245 6,144,733 1,312,829 1,321,504 21.5% (79,578) 54,280 90,891 $11.58

Southeast Ind 457 14,597,742 2,072,450 2,319,543 15.9% (134,622) 524,898 164,043 $13.76

Southwest Ind 43 1,598,904 408,528 408,528 25.6% 108,181 196,608 0 $10.60

Totals 1,090 32,406,885 5,358,472 5,676,154 17.5% (288,100) 825,747 254,934 $13.32


Warehouse Market Statistics Year-End 2008



Airport Ind 1,668 44,342,481 4,484,083 4,923,217 11.1% (895,272) 815,943 0 $7.75

Northeast Ind 563 11,693,537 1,139,361 1,252,249 10.7% (38,049) 167,947 0 $12.41

Northwest Ind 2,177 48,026,907 5,739,798 5,832,556 12.1% (1,018,503) 1,251,843 123,974 $7.61

Southeast Ind 2,572 70,149,297 8,942,200 9,246,699 13.2% (1,244,035) 2,797,549 445,484 $8.52

Southwest Ind 1,091 71,677,733 12,698,866 12,916,697 18.0% 736,067 4,837,591 1,352,110 $5.12

Totals 8,071 245,889,955 33,004,308 34,171,418 13.9% (2,459,792) 9,870,873 1,921,568 $7.03


Total Industrial Market Statistics Year-End 2008



Airport Ind 1,820 49,901,489 5,302,970 5,767,619 11.6% (1,051,559) 815,943 0 $8.35

Northeast Ind 756 16,200,035 1,885,139 2,034,426 12.6% (63,843) 217,908 0 $13.72

Northwest Ind 2,422 54,171,640 7,052,627 7,154,060 13.2% (1,098,081) 1,306,123 214,865 $8.23

Southeast Ind 3,029 84,747,039 11,014,650 11,566,242 13.6% (1,378,657) 3,322,447 609,527 $9.41

Southwest Ind 1,134 73,276,637 13,107,394 13,325,225 18.2% 844,248 5,034,199 1,352,110 $5.26

Totals 9,161 278,296,840 38,362,780 39,847,572 14.3% (2,747,892) 10,696,620 2,176,502 $7.73


Existing Inventory Vacancy



FIGURES AT A GLANCE






FIGURES AT A GLANCE

Flex Submarket Statistics Year-End 2008



Central Phoenix Ind 44 735,457 60,751 60,751 8.3% (3,056) 0 0 $13.79 Chandler Airport Ind 9 382,120 219,624 219,624 57.5% 6,996 226,620 0 $15.97 Chandler Ind 72 2,927,018 390,042 467,552 16.0% 15,564 90,140 89,895 $16.04 Chandler N/Gilbert Ind 96 2,467,223 276,257 349,444 14.2% (55,299) 80,441 6,783 $12.53 Deer Vly/Pinnacle Pk Ind 75 2,999,103 647,128 651,278 21.7% 22,604 0 68,891 $12.62 Falcon Fld/Apache Jct Ind 27 500,829 155,552 155,552 31.1% 18,669 127,697 0 $12.99 Glendale Ind 11 371,083 121,422 121,422 32.7% 34,392 37,067 0 $13.05 Goodyear Ind 12 377,158 226,034 226,034 59.9% 23,839 196,608 0 $12.14 Grand Avenue Ind 23 214,155 16,172 16,172 7.6% (14,112) 0 0 $8.80 Mesa Ind 38 364,533 16,992 16,992 4.7% (3,398) 0 0 $16.00 N Glendale/Sun City Ind 22 480,558 97,863 102,388 21.3% (2,250) 17,213 22,000 $11.63 North Airport Ind 44 2,117,890 397,150 412,150 19.5% (154,685) 0 0 $13.11 North Black Canyon Ind 59 1,234,865 286,679 286,679 23.2% (68,532) 0 0 $9.52 S Airport N of Roeser Ind 55 2,242,968 205,166 207,255 9.2% 41,068 0 0 $13.24 S Airport S of Roeser Ind 12 271,047 16,111 24,537 9.1% (9,629) 0 0 $11.01 SC N of Salt River Ind 34 873,310 198,693 198,693 22.8% (31,274) 0 0 $15.32 SC S of Salt River Ind 7 53,793 1,767 1,767 3.3% (1,767) 0 0 $14.28 Scottsdale Airpark Ind 94 2,403,918 456,909 489,405 20.4% (3,917) 0 0 $16.91 Scottsdale/Salt River Ind 55 1,367,123 228,118 232,021 17.0% (18,821) 49,961 0 $16.18 SW N of Buckeye Road Ind 12 237,383 0 0 0.0% 0 0 0 $0.00 SW S of Buckeye Road Ind 11 591,739 0 0 0.0% 89,640 0 0 $5.40 Tempe East Ind 45 1,224,868 92,215 92,215 7.5% 98,928 0 0 $14.79 Tempe Northwest Ind 65 1,986,513 451,452 453,552 22.8% (81,706) 0 67,365 $12.38 Tempe Southwest Ind 105 4,744,638 470,316 564,612 11.9% (134,376) 0 0 $12.51 Tolleson Ind 8 392,624 182,494 182,494 46.5% (5,298) 0 0 $11.67 W Phx N of Thomas Rd Ind 42 638,300 142,065 142,065 22.3% (51,680) 0 0 $7.26 W Phx S of Thomas Rd Ind 13 206,669 1,500 1,500 0.7% 0 0 0 $0.00

Totals 1,090 32,406,885 5,358,472 5,676,154 17.5% (288,100) 825,747 254,934 $13.32


Warehouse Submarket Statistics Year-End 2008



Central Phoenix Ind 190 2,915,319 268,060 275,666 9.5% 1,814 60,865 0 $11.68 Chandler Airport Ind 39 907,023 253,317 253,317 27.9% 7,293 250,110 257,351 $10.75 Chandler Ind 280 14,295,883 1,194,534 1,212,416 8.5% 18,887 729,828 0 $10.06 Chandler N/Gilbert Ind 586 12,441,627 2,522,301 2,618,981 21.1% (308,341) 1,109,492 89,403 $8.43 Deer Vly/Pinnacle Pk Ind 514 12,098,204 992,808 1,064,306 8.8% (305,297) 0 59,278 $9.31 Falcon Fld/Apache Jct Ind 163 3,721,097 433,469 521,516 14.0% 3,528 192,130 98,730 $9.93 Glendale Ind 69 3,098,453 1,501,875 1,501,875 48.5% (389,899) 533,443 0 $5.57 Goodyear Ind 98 7,555,057 1,954,526 1,954,526 25.9% 700,315 1,167,122 0 $4.92 Grand Avenue Ind 561 12,369,074 1,175,759 1,191,019 9.6% (318,067) 4,700 0 $6.46 Mesa Ind 401 6,177,134 1,282,385 1,308,529 21.2% (393,720) 470,327 0 $7.83 N Glendale/Sun City Ind 115 2,854,502 998,620 998,620 35.0% 141,899 713,700 64,696 $9.81 North Airport Ind 451 11,116,238 890,919 1,086,923 9.8% (411,115) 0 0 $8.61 North Black Canyon Ind 183 3,271,507 220,229 220,229 6.7% (43,273) 0 0 $9.17 S Airport N of Roeser Ind 420 11,460,168 1,304,778 1,325,170 11.6% 108,675 406,422 0 $8.14 S Airport S of Roeser Ind 148 4,064,944 700,371 700,371 17.2% (102,574) 380,321 0 $9.22 SC N of Salt River Ind 563 16,074,103 1,478,470 1,701,208 10.6% (462,860) 29,200 0 $6.39 SC S of Salt River Ind 86 1,627,028 109,545 109,545 6.7% (27,398) 0 0 $8.66 Scottsdale Airpark Ind 281 5,078,675 631,661 650,160 12.8% (97,075) 0 0 $12.20 Scottsdale/Salt River Ind 92 3,699,543 239,640 326,423 8.8% 57,212 107,082 0 $13.55 SW N of Buckeye Road Ind 609 30,072,198 3,407,815 3,467,132 11.5% (157,187) 247,214 0 $5.70 SW S of Buckeye Road Ind 196 10,895,414 2,199,163 2,233,082 20.5% 474,070 1,479,115 0 $4.81 Tempe East Ind 325 5,632,157 242,794 242,794 4.3% (44,383) 0 0 $8.87 Tempe Northwest Ind 283 9,492,720 1,448,365 1,469,384 15.5% (126,707) 0 0 $8.47 Tempe Southwest Ind 495 17,481,656 1,565,035 1,619,762 9.3% (400,592) 45,662 0 $7.18 Tolleson Ind 188 23,155,064 5,137,362 5,261,957 22.7% (281,131) 1,944,140 1,352,110 $4.93 W Phx N of Thomas Rd Ind 438 7,948,448 487,668 487,668 6.1% 82,299 0 0 $7.32 W Phx S of Thomas Rd Ind 297 6,386,719 362,839 368,839 5.8% (186,165) 0 0 $6.99

Totals 8,071 245,889,955 33,004,308 34,171,418 13.9% (2,459,792) 9,870,873 1,921,568 $7.03









FIGURES AT A GLANCE

Total Industrial Submarket Statistics Year-End 2008



Central Phoenix Ind 234 3,650,776 328,811 336,417 9.2% (1,242) 60,865 0 $12.00 Chandler Airport Ind 48 1,289,143 472,941 472,941 36.7% 14,289 476,730 257,351 $12.27 Chandler Ind 352 17,222,901 1,584,576 1,679,968 9.8% 34,451 819,968 89,895 $11.64 Chandler N/Gilbert Ind 682 14,908,850 2,798,558 2,968,425 19.9% (363,640) 1,189,933 96,186 $8.68 Deer Vly/Pinnacle Pk Ind 589 15,097,307 1,639,936 1,715,584 11.4% (282,693) 0 128,169 $10.47 Falcon Fld/Apache Jct Ind 190 4,221,926 589,021 677,068 16.0% 22,197 319,827 98,730 $10.42 Glendale Ind 80 3,469,536 1,623,297 1,623,297 46.8% (355,507) 570,510 0 $5.92 Goodyear Ind 110 7,932,215 2,180,560 2,180,560 27.5% 724,154 1,363,730 0 $5.40 Grand Avenue Ind 584 12,583,229 1,191,931 1,207,191 9.6% (332,179) 4,700 0 $6.47 Mesa Ind 439 6,541,667 1,299,377 1,325,521 20.3% (397,118) 470,327 0 $7.84 N Glendale/Sun City Ind 137 3,335,060 1,096,483 1,101,008 33.0% 139,649 730,913 86,696 $9.98 North Airport Ind 495 13,234,128 1,288,069 1,499,073 11.3% (565,800) 0 0 $9.52 North Black Canyon Ind 242 4,506,372 506,908 506,908 11.2% (111,805) 0 0 $9.31 S Airport N of Roeser Ind 475 13,703,136 1,509,944 1,532,425 11.2% 149,743 406,422 0 $8.72 S Airport S of Roeser Ind 160 4,335,991 716,482 724,908 16.7% (112,203) 380,321 0 $9.26 SC N of Salt River Ind 597 16,947,413 1,677,163 1,899,901 11.2% (494,134) 29,200 0 $7.01 SC S of Salt River Ind 93 1,680,821 111,312 111,312 6.6% (29,165) 0 0 $8.75 Scottsdale Airpark Ind 375 7,482,593 1,088,570 1,139,565 15.2% (100,992) 0 0 $13.79 Scottsdale/Salt River Ind 147 5,066,666 467,758 558,444 11.0% 38,391 157,043 0 $14.60 SW N of Buckeye Road Ind 621 30,309,581 3,407,815 3,467,132 11.4% (157,187) 247,214 0 $5.70 SW S of Buckeye Road Ind 207 11,487,153 2,199,163 2,233,082 19.4% 563,710 1,479,115 0 $4.83 Tempe East Ind 370 6,857,025 335,009 335,009 4.9% 54,545 0 0 $10.85 Tempe Northwest Ind 348 11,479,233 1,899,817 1,922,936 16.8% (208,413) 0 67,365 $9.20 Tempe Southwest Ind 600 22,226,294 2,035,351 2,184,374 9.8% (534,968) 45,662 0 $8.45 Tolleson Ind 196 23,547,688 5,319,856 5,444,451 23.1% (286,429) 1,944,140 1,352,110 $5.08 W Phx N of Thomas Rd Ind 480 8,586,748 629,733 629,733 7.3% 30,619 0 0 $7.31 W Phx S of Thomas Rd Ind 310 6,593,388 364,339 370,339 5.6% (186,165) 0 0 $6.99

Totals 9,161 278,296,840 38,362,780 39,847,572 14.3% (2,747,892) 10,696,620 2,176,502 $7.73








FIGURES AT A GLANCE

Flex Market Statistics Year-End 2008

Net Quoted

Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates

2008 4q 1,090 32,406,885 5,358,472 5,676,154 17.5% (174,382) 3 80,379 12 254,934 $13.32 2008 3q 1,087 32,326,506 5,183,385 5,421,393 16.8% (381,547) 9 268,140 15 335,313 $14.16 2008 2q 1,078 32,058,366 4,365,581 4,771,706 14.9% 139,739 10 337,929 22 514,340 $14.28 2008 1q 1,068 31,720,437 4,160,570 4,573,516 14.4% 128,090 4 139,299 27 727,805 $13.95 2007 4q 1,064 31,581,138 4,189,894 4,562,307 14.4% (247,099) 7 271,456 15 460,627 $13.74 2007 3q 1,057 31,309,682 3,786,357 4,043,752 12.9% 323,389 3 145,335 18 597,636 $13.92 2007 2q 1,055 31,364,347 4,125,343 4,421,806 14.1% 332,174 9 234,411 14 516,857 $13.66 2007 1q 1,047 31,351,696 4,402,444 4,741,329 15.1% 224,658 8 251,611 16 584,411 $13.11

2006 1,040 31,181,635 4,253,462 4,795,926 15.4% 1,043,941 59 1,566,963 20 665,538 $12.68 2005 981 29,614,672 3,827,918 4,272,904 14.4% 1,844,834 35 900,591 45 1,091,378 $11.27 2004 946 28,714,081 4,790,853 5,217,147 18.2% 1,044,239 27 690,982 27 616,899 $10.40 2003 919 28,023,099 5,319,703 5,570,404 19.9% 971,152 15 817,750 20 586,282 $10.06 2002 904 27,205,349 5,218,731 5,723,806 21.0% (205,441) 20 798,561 7 675,674 $11.05 2001 884 26,406,788 4,222,849 4,719,804 17.9% 157,198 33 1,429,077 16 635,550 $10.91 2000 851 24,977,711 3,210,740 3,447,925 13.8% 820,530 27 1,481,978 29 1,317,745 $10.08 1999 825 23,509,733 2,666,926 2,800,477 11.9% 1,104,243 46 1,810,272 12 649,422 $10.30


Warehouse Market Statistics Year-End 2008

Net Quoted


2008 4q 8,071 245,889,955 33,004,308 34,171,418 13.9% (1,126,012) 18 1,087,153 19 1,921,568 $7.03 2008 3q 8,054 244,820,863 30,983,572 31,976,314 13.1% 530,701 45 2,252,938 36 2,961,100 $7.02 2008 2q 8,009 242,567,925 29,318,328 30,254,077 12.5% (1,665,557) 40 3,637,884 62 4,637,539 $7.11 2008 1q 7,969 238,930,041 24,352,031 24,950,636 10.4% (198,924) 57 2,892,898 94 6,715,415 $7.28 2007 4q 7,912 236,037,143 21,304,565 21,858,814 9.3% (66,473) 52 3,088,724 118 8,173,305 $7.23 2007 3q 7,860 232,948,419 18,071,091 18,703,617 8.0% 1,060,056 39 1,168,057 158 10,680,087 $7.20 2007 2q 7,822 231,861,362 17,873,033 18,676,616 8.1% 2,088,330 54 3,015,904 136 9,981,660 $7.03 2007 1q 7,768 228,845,458 17,018,260 17,749,042 7.8% 831,533 57 2,545,801 144 9,252,713 $7.22

2006 7,713 226,508,304 15,477,275 16,243,421 7.2% 4,220,994 179 6,148,423 144 8,775,936 $6.85 2005 7,538 220,634,521 13,890,723 14,590,632 6.6% 8,676,105 124 4,798,443 142 4,118,329 $6.33 2004 7,419 215,934,386 17,955,344 18,566,602 8.6% 5,834,102 136 3,980,644 70 3,348,415 $5.84 2003 7,289 213,349,582 20,509,982 21,815,900 10.2% 1,211,453 83 2,629,502 72 2,048,615 $6.52 2002 7,206 210,720,080 18,417,655 20,397,851 9.7% 499,298 78 4,051,013 55 1,970,007 $6.00 2001 7,134 206,776,069 15,474,932 16,953,138 8.2% 3,104,001 108 5,570,459 66 4,023,894 $6.04 2000 7,029 201,222,310 13,711,712 14,503,380 7.2% 4,694,484 137 5,409,713 97 6,441,058 $7.70 1999 6,898 195,921,825 12,888,954 13,897,379 7.1% 1,461,405 150 5,658,602 102 4,436,452 $5.40


Total Industrial Market Statistics Year-End 2008

Net Quoted


2008 4q 9,161 278,296,840 38,362,780 39,847,572 14.3% (1,300,394) 21 1,167,532 31 2,176,502 $7.73 2008 3q 9,141 277,147,369 36,166,957 37,397,707 13.5% 149,154 54 2,521,078 51 3,296,413 $7.80 2008 2q 9,087 274,626,291 33,683,909 35,025,783 12.8% (1,525,818) 50 3,975,813 84 5,151,879 $7.96 2008 1q 9,037 270,650,478 28,512,601 29,524,152 10.9% (70,834) 61 3,032,197 121 7,443,220 $8.16 2007 4q 8,976 267,618,281 25,494,459 26,421,121 9.9% (313,572) 59 3,360,180 133 8,633,932 $8.11 2007 3q 8,917 264,258,101 21,857,448 22,747,369 8.6% 1,383,445 42 1,313,392 176 11,277,723 $8.11 2007 2q 8,877 263,225,709 21,998,376 23,098,422 8.8% 2,420,504 63 3,250,315 150 10,498,517 $7.89 2007 1q 8,815 260,197,154 21,420,704 22,490,371 8.6% 1,056,191 65 2,797,412 160 9,837,124 $8.15

2006 8,753 257,689,939 19,730,737 21,039,347 8.2% 5,264,935 238 7,715,386 164 9,441,474 $7.82 2005 8,519 250,249,193 17,718,641 18,863,536 7.5% 10,520,939 159 5,699,034 187 5,209,707 $7.25 2004 8,365 244,648,467 22,746,197 23,783,749 9.7% 6,878,341 163 4,671,626 97 3,965,314 $6.87 2003 8,208 241,372,681 25,829,685 27,386,304 11.3% 2,182,605 98 3,447,252 92 2,634,897 $7.29 2002 8,110 237,925,429 23,636,386 26,121,657 11.0% 293,857 98 4,849,574 62 2,645,681 $6.48 2001 8,018 233,182,857 19,697,781 21,672,942 9.3% 3,261,199 141 6,999,536 82 4,659,444 $6.53 2000 7,880 226,200,021 16,922,452 17,951,305 7.9% 5,515,014 164 6,891,691 126 7,758,803 $7.98 1999 7,723 219,431,558 15,555,880 16,697,856 7.6% 2,565,648 196 7,468,874 114 5,085,874 $5.90


Existing Inventory Vacancy Deliveries UC Inventory








LEASING ACTIVITY

Leasing Highlights in Select CoStar MarketsColor Coded by Vacancy Rate

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Historical Rental RatesBased on Quoted Rental Rates


Vacancy by Available Space Type Vacancy by Building TypePercent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Building Type


U.S. Rental Rate Comparison Future Space AvailableBased on Average Quoted Rental Rates Space Scheduled to be Available for Occupancy*

Source: CoStar Property® Source: CoStar Property® * Includes Under Construction Space

Phoenix United States Phoenix United States

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Dollar

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96%

4%

Direct Sublet

5%

95%

Direct Sublet

14%

86%

Flex Warehouse

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Mill

ions

84%

16%

Flex Warehouse

LEASING ACTIVITY






LEASING ACTIVITY


* Renewal

Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company

1 16920 W Commerce Ln Goodyear Ind 512,780 2nd Amazon.com Cushman & Wakefield, Inc. CB Richard Ellis

2 3380 S Price Rd* Chandler Ind 355,200 3rd Orbital Sciences Corporation CB Richard Ellis Direct Deal

3 601 N 75th Ave Tolleson Ind 323,346 2nd aspenhome CB Richard Ellis Myron Zimmerman Investments

4 4417-4427 W Buckeye Rd SW S of Buckeye Road Ind 210,600 2nd US Census Bureau & Computer Sciences Corp. Jones Lang LaSalle Cashen Realty Advisors

5 6825 W Buckeye Rd Tolleson Ind 174,796 3rd HD Supply CB Richard Ellis Cushman & Wakefield, Inc.

6 4707 E Baseline Rd S Airport S of Roeser Ind 136,683 4th N/A Grubb & Ellis|BRE Commercial LLC CB Richard Ellis

7 125 S 67th Ave SW N of Buckeye Road Ind 120,668 1st Bose CB Richard Ellis Grubb & Ellis|BRE Commercial LLC

8 1850 E Watkins St S Airport N of Roeser Ind 108,092 1st US Airconditioning Distributors, Inc. Ross Brown Partners, Inc. CB Richard Ellis

9 4410 E Cotton Center Blvd S Airport N of Roeser Ind 101,269 3rd Shutterfly, Inc. Cushman & Wakefield, Inc. CB Richard Ellis

10 4524 N 44th Ave Grand Avenue Ind 98,468 3rd Consolidated Steel, Inc. Grubb & Ellis|BRE Commercial LLC Direct Deal

11 7300 W Boston St* Chandler Ind 94,341 4th Inter-Tel Lee & Associates Lee & Associates

12 3815 W Washington St SW N of Buckeye Road Ind 89,243 2nd Beltmann Group, Inc. Colliers International Colliers International

13 4750 S 44th Pl Central Phoenix Ind 79,946 2nd Collin’s College Grubb & Ellis|BRE Commercial LLC CB Richard Ellis

14 23751 N 23rd Ave Deer Vly/Pinnacle Pk Ind 76,725 1st Redflex Traffic Systems, Inc. CB Richard Ellis Cushman & Wakefield, Inc.

15 3425 E Van Buren St North Airport Ind 74,268 1st Sara Lee Lee & Associates CB Richard Ellis

16 8313 W Pierce St Tolleson Ind 72,596 1st Quietflex Grubb & Ellis|BRE Commercial LLC CB Richard Ellis

17 2135 W Obispo Ave Chandler N/Gilbert Ind 69,000 3rd Trane Cushman & Wakefield, Inc. Myron Zimmerman Investments

18 801 S 75th Ave Tolleson Ind 68,229 3rd Special Distribution ProStar Realty CB Richard Ellis

19 651 N 101st Ave Tolleson Ind 67,204 2nd Cummins Rocky Mountain LLC EBS & Associates LLC Direct Deal

20 951 W Watkins St SC N of Salt River Ind 66,940 3rd Auction Systems Auctioneers & Appraisers JMS Commercial Real Estate NAI Horizon

21 1740 S 40th Ave SW S of Buckeye Road Ind 62,949 4th GES Cushman & Wakefield, Inc. Colliers International

22 4949 W Buckeye Rd SW S of Buckeye Road Ind 53,760 1st Antigua Group, Inc. CB Richard Ellis Grubb & Ellis|BRE Commercial LLC

23 5555 N 51st Ave* Grand Avenue Ind 53,040 3rd Biolab CB Richard Ellis DAUM Commercial RE Service

24 4829 S 38th St S Airport N of Roeser Ind 52,447 4th Corbins Electric Corridor Commercial Grubb & Ellis|BRE Commercial LLC

25 400 E Ray Rd Chandler N/Gilbert Ind 52,125 2nd CMC Steel Arizona N/A DAUM Commercial RE Service

26 7102 W Roosevelt St Tolleson Ind 50,000 4th N/A N/A Colliers International

27 1501 E Buckeye Rd SC N of Salt River Ind 50,000 4th U.S Citizenship and Immigration Services Jones Lang LaSalle Grubb & Ellis|BRE Commercial LLC

28 5 S 84th Ave* Tolleson Ind 48,158 3rd Menlo Logistics Lee & Associates Grubb & Ellis|BRE Commercial LLC

29 8465 N 90th St Scottsdale/Salt River Ind 47,758 2nd Xyron, Inc. Direct Deal Ross Brown Partners, Inc.

30 4440 E Elwood St North Airport Ind 47,544 2nd Cogito Corporation Lee & Associates Lee & Associates

31 3701 W Cambridge Ave* W Phx S of Thomas Rd Ind 42,127 3rd Arizona Correctional Industries N/A N/A

32 7138 N 110th Ave Glendale Ind 40,081 4th SLT Expressway NAI Horizon Coldwell Banker Commercial NRT

33 1444 W Scott Ave Chandler N/Gilbert Ind 39,000 1st Lockheed Martin CresaPartners Commercial Properties, Inc.

34 8606 W Ludlow N Glendale/Sun City Ind 38,705 3rd Home & Garden Expo Center Capital Realty Advisors Lee & Associates

35 2424 W University Dr Tempe Northwest Ind 38,400 3rd Your Electric Supply Company Colliers International Lee & Associates

36 6607 W Boston St Chandler Ind 38,300 3rd N/A N/A CB Richard Ellis

37 941 S Park Ln Tempe Northwest Ind 38,000 2nd Walters & Wolf Jones Lang LaSalle Grubb & Ellis|BRE Commercial LLC

38 10115 W Van Buren St Tolleson Ind 37,332 4th HD Supply CB Richard Ellis CB Richard Ellis

39 801 N 44th Ave SW N of Buckeye Road Ind 36,037 3rd Empire SW Lee & Associates Lee & Associates

40 2210 S Roosevelt St Tempe Southwest Ind 34,470 4th TUV Rheinland PTL, LLC N/A Commercial Properties, Inc.

Select Top Industrial Leases Based on Leased Square Footage For Deals Signed in 2008






SALES ACTIVITY

The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter

Source: CoStar COMPS®

Sales Volume & Price Sales Analysis by Building SizeBased on Industrial Building Sales of 15,000 SF and Larger Based on Industrial Bldg Sales From Oct. 2007 - Sept. 2008

Bldg Size # RBA $ Volume Price/SF Cap Rate

< 25,000 SF 309 2,669,673 334,962,301$ 125.47$ 7.20%

25K-99K SF 84 4,235,659 390,018,919$ 92.08$ 6.86%

100K-249K SF 22 3,499,115 355,422,391$ 101.57$ 7.03%

>250K SF 10 5,078,737 323,125,614$ 63.62$ 6.40%

Source: CoStar COMPS® Source: CoStar COMPS®

U.S. Price/SF Comparison U.S. Cap Rate ComparisonBased on Industrial Building Sales of 15,000 SF and Larger Based on Industrial Building Sales of 15,000 SF and Larger

Source: CoStar COMPS® Source: CoStar COMPS®

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Phoenix US

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Phoenix US






SALES ACTIVITY

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SALES ACTIVITY

Select Land Sales Based on Industrial Zoned Land Sales Occurring From Oct. 2007 - Dec. 2008

SW Washington St & 48th St, Phoenix NE Broadway Rd & 36th St, Phoenix NE Sherman St & 75th Ave, Phoenix

Sale Price: $13,318,750 Sale Price: $7,725,000 Sale Price: $3,499,698Acres: 16.15 Acres: 16.55 Acres: 12.50Price/SF: $18.93 Price/SF: $10.71 Price/SF: $6.43Closing Date: 11/12/2008 Closing Date: 10/07/2008 Closing Date: 09/25/2008Zoning: A-2, Phoenix Zoning: IND PK, Phoenix Zoning: A-1, PhoenixIntended Use: Hold for Investment Intended Use: Industrial Intended Use: Food ProcessingBuyer: Lincoln Realty Capital Corporation Buyer: Reliance Management, LLC Buyer: Barrel O'Fun Snack Foods Co SouthweSeller: Lauth Property Group Seller: Merrihill, Ltd Seller: Sun State Builders, Inc.

NW Chandler Blvd & Enterpris Pl, Chandler NE Broadway Rd & 43rd Ave, Phoenix NW Buckeye Rd & 94th Ave, Tolleson

Sale Price: $1,878,579 Sale Price: $1,792,296 Sale Price: $1,697,490Acres: 4.79 Acres: 5.00 Acres: 5.58Price/SF: $9.00 Price/SF: $8.23 Price/SF: $6.99Closing Date: 07/30/2008 Closing Date: 07/15/2008 Closing Date: 06/30/2008Zoning: I-1, Chandler Zoning: I-3, Phoenix Zoning: I-2, TollesonIntended Use: Industrial Intended Use: Industrial Intended Use: OfficeBuyer: Knoell Properties Buyer: Sun State Steel, LLC Buyer: LGE CorporationSeller: Craig R & Diana P Tanner Seller: Spencer Shumway, Tr Seller: HRCF-Biltmore Buckeye94, LLC





Phoenix Industrial MarketMARKET HIGHLIGHTS - FLEX & WAREHOUSE




A I R P O R T M A R K E T

Deliveries, Absorption & Vacancy Historical Analysis, Flex and Warehouse


Vacant Space Quoted Rental RatesHistorical Analysis, Flex and Warehouse Historical Analysis, Flex and Warehouse


Net QuotedPeriod # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates2008 4q 1,820 49,901,489 5,767,619 11.6% (267,537) 4 68,947 0 0 $8.35

2008 3q 1,816 49,832,542 5,431,135 10.9% (189,663) 11 572,475 4 68,947 $8.67

2008 2q 1,805 49,260,067 4,668,997 9.5% (538,387) 2 120,601 11 572,475 $8.98

2008 1q 1,803 49,139,466 4,010,009 8.2% (55,972) 3 53,920 13 693,076 $9.36

2007 4q 1,800 49,085,546 3,900,117 7.9% (98,842) 7 208,946 14 674,889 $9.63

2007 3q 1,793 48,876,600 3,592,329 7.3% (325,882) 2 20,404 19 800,146 $9.41

2007 2q 1,791 48,856,196 3,246,043 6.6% 286,076 1 135,968 19 795,830 $8.76

2007 1q 1,790 48,720,228 3,396,151 7.0% 109,406 6 524,339 10 365,318 $9.00

2006 4q 1,784 48,195,889 2,981,218 6.2% 437,354 5 373,826 7 660,307 $8.44

2006 3q 1,779 47,822,063 3,044,746 6.4% 226,343 4 154,107 12 1,034,133 $8.06

2006 2q 1,775 47,667,956 3,116,982 6.5% 71,725 9 198,865 13 985,970 $7.42

2006 1q 1,766 47,469,091 2,989,842 6.3% 141,940 0 0 18 726,798 $6.83

2005 4q 1,766 47,469,091 3,131,782 6.6% 887,897 3 233,546 8 138,000 $6.62

2005 3q 1,764 47,245,554 3,796,142 8.0% 487,984 3 143,617 9 280,421 $6.58

2005 2q 1,762 47,152,836 4,191,408 8.9% 495,645 4 156,261 6 377,163 $6.91

2005 1q 1,758 46,996,575 4,530,792 9.6% 480,505 2 110,509 7 299,878 $6.58


UC InventoryDelivered InventoryExisting Inventory Vacancy

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N O R T H E A S T M A R K E T





Net QuotedPeriod # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates2008 4q 756 16,200,035 2,034,426 12.6% (288,253) 0 0 0 0 $13.72

2008 3q 756 16,200,035 1,746,173 10.8% 21,393 0 0 0 0 $14.64

2008 2q 756 16,200,035 1,767,566 10.9% 144,387 5 98,852 0 0 $14.87

2008 1q 751 16,101,183 1,813,101 11.3% 58,630 3 119,056 5 98,852 $14.66

2007 4q 748 15,982,127 1,752,675 11.0% (191,739) 1 9,500 7 192,108 $14.69

2007 3q 747 15,972,627 1,551,436 9.7% 43,802 5 153,626 8 201,608 $14.71

2007 2q 743 16,019,001 1,641,612 10.2% 100,445 1 7,395 7 193,616 $14.87

2007 1q 742 16,011,606 1,734,662 10.8% 65,900 16 336,297 6 161,021 $14.90

2006 4q 726 15,675,309 1,464,265 9.3% (104,582) 2 96,703 20 491,546 $14.19

2006 3q 724 15,578,606 1,262,980 8.1% 194,265 6 128,325 19 440,395 $13.91

2006 2q 718 15,450,281 1,328,920 8.6% 270,318 13 338,925 18 438,644 $12.41

2006 1q 706 15,185,606 1,334,563 8.8% 15,214 4 61,485 26 664,164 $11.49

2005 4q 702 15,124,121 1,288,292 8.5% 119,806 11 283,343 21 488,403 $12.36

2005 3q 691 14,840,778 1,124,755 7.6% 121,029 2 40,544 25 636,611 $12.15

2005 2q 689 14,800,234 1,205,240 8.1% 368,045 3 61,745 19 560,346 $12.20

2005 1q 686 14,738,489 1,511,540 10.3% 57,432 4 68,675 13 424,951 $12.21



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N O R T H W E S T M A R K E T





Net QuotedPeriod # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates2008 4q 2,422 54,171,640 7,154,060 13.2% (463,678) 0 0 8 214,865 $8.23

2008 3q 2,422 54,171,640 6,690,382 12.4% (112,071) 10 464,642 8 214,865 $8.36

2008 2q 2,412 53,706,998 6,113,669 11.4% (854,944) 5 242,914 15 598,229 $8.36

2008 1q 2,407 53,464,084 5,015,811 9.4% 332,612 7 598,567 20 841,143 $8.66

2007 4q 2,400 52,865,517 4,749,856 9.0% (780,943) 9 149,277 16 1,159,365 $8.72

2007 3q 2,391 52,716,240 3,819,636 7.2% 16,238 13 476,479 22 1,277,513 $8.89

2007 2q 2,378 52,239,761 3,359,395 6.4% 579,220 27 451,706 33 1,725,611 $8.98

2007 1q 2,351 51,788,055 3,486,909 6.7% 169,170 10 315,043 49 1,326,604 $9.20

2006 4q 2,341 51,473,012 3,341,036 6.5% 243,585 9 233,428 41 1,044,756 $8.91

2006 3q 2,332 51,239,584 3,351,193 6.5% 470,426 17 434,985 45 1,205,977 $8.59

2006 2q 2,315 50,804,599 3,386,634 6.7% 330,998 24 640,441 44 1,308,756 $8.80

2006 1q 2,291 50,164,158 3,077,191 6.1% 424,650 20 566,261 58 1,414,558 $9.36

2005 4q 2,271 49,597,897 2,935,580 5.9% 444,245 20 632,994 55 1,586,603 $9.10

2005 3q 2,251 48,964,903 2,746,831 5.6% 711,742 15 278,324 49 1,464,043 $8.69

2005 2q 2,236 48,686,579 3,180,249 6.5% 622,746 15 245,361 54 1,432,842 $8.72

2005 1q 2,221 48,441,218 3,557,634 7.3% 88,986 5 82,367 44 692,135 $8.14



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S O U T H E A S T M A R K E TMARKET HIGHLIGHTS - FLEX & WAREHOUSE





Net QuotedPeriod # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates2008 4q 3,029 84,747,039 11,566,242 13.6% (307,721) 13 452,681 21 609,527 $9.41

2008 3q 3,016 84,294,358 10,805,840 12.8% (123,979) 22 557,558 33 1,014,587 $9.75

2008 2q 2,994 83,736,800 10,124,303 12.1% (460,692) 18 669,571 42 1,141,758 $9.90

2008 1q 2,976 83,067,229 8,994,040 10.8% (486,265) 42 1,642,637 48 1,393,967 $9.83

2007 4q 2,934 81,424,592 6,865,138 8.4% 114,448 26 658,343 67 2,375,813 $9.94

2007 3q 2,908 80,766,249 6,321,243 7.8% 502,247 13 210,874 87 2,884,590 $9.90

2007 2q 2,895 80,555,375 6,612,616 8.2% 637,860 22 414,348 57 1,716,610 $9.47

2007 1q 2,874 80,362,787 7,057,888 8.8% 526,842 20 357,246 63 1,738,060 $9.23

2006 4q 2,857 80,295,738 7,517,681 9.4% (799,331) 15 514,481 62 1,443,220 $8.78

2006 3q 2,842 79,781,257 6,203,869 7.8% 1,002,894 17 411,599 54 1,326,790 $8.69

2006 2q 2,826 79,427,108 6,852,614 8.6% 993,457 41 1,085,657 53 1,278,519 $8.29

2006 1q 2,787 78,484,391 6,903,354 8.8% (113,435) 20 433,622 86 2,237,473 $7.99

2005 4q 2,767 78,050,769 6,356,297 8.1% 1,290,244 11 683,767 79 1,964,540 $7.94

2005 3q 2,757 77,376,402 6,972,174 9.0% 955,791 10 255,058 72 2,221,417 $7.82

2005 2q 2,747 77,121,344 7,672,907 9.9% 852,847 23 405,157 43 1,723,701 $7.84

2005 1q 2,724 76,716,187 8,120,597 10.6% 53,304 9 173,615 53 1,541,364 $8.04



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S O U T H W E S T M A R K E TMARKET HIGHLIGHTS - FLEX & WAREHOUSE





Net QuotedPeriod # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates2008 4q 1,134 73,276,637 13,325,225 18.2% 26,795 4 645,904 2 1,352,110 $5.26

2008 3q 1,131 72,648,794 12,724,177 17.5% 553,474 11 926,403 6 1,998,014 $5.17

2008 2q 1,120 71,722,391 12,351,248 17.2% 183,818 20 2,843,875 16 2,839,417 $5.30

2008 1q 1,100 68,878,516 9,691,191 14.1% 80,161 6 618,017 35 4,416,182 $5.36

2007 4q 1,094 68,260,499 9,153,335 13.4% 643,504 16 2,334,114 29 4,231,757 $5.25

2007 3q 1,078 65,926,385 7,462,725 11.3% 1,147,040 9 452,009 40 6,113,866 $5.27

2007 2q 1,070 65,555,376 8,238,756 12.6% 816,903 12 2,240,898 34 6,066,850 $5.23

2007 1q 1,058 63,314,478 6,814,761 10.8% 184,873 13 1,264,487 32 6,246,121 $5.40

2006 4q 1,045 62,049,991 5,735,147 9.2% (386,938) 13 1,460,313 34 5,801,645 $5.12

2006 3q 1,032 60,589,678 3,887,896 6.4% 1,054,099 3 38,509 37 4,111,916 $5.12

2006 2q 1,029 60,551,169 4,903,486 8.1% 172,502 7 327,737 36 3,392,718 $4.60

2006 1q 1,022 60,223,432 4,748,251 7.9% 619,451 9 216,117 33 2,990,401 $4.38

2005 4q 1,013 60,007,315 5,151,585 8.6% 825,383 6 463,381 24 1,032,161 $4.37

2005 3q 1,007 59,543,934 5,513,587 9.3% 918,224 0 0 20 932,986 $4.55

2005 2q 1,007 59,543,934 6,431,811 10.8% 219,773 10 786,327 11 589,120 $4.43

2005 1q 997 58,757,607 5,865,257 10.0% 519,311 3 594,443 16 1,249,708 $7.05



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ns

SF

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Perce

nt V

acant


$5.05

$5.10

$5.15

$5.20

$5.25

$5.30

$5.35

$5.40

$5.45

2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q

Dollar

s/SF/Y

ear

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q

Millio

ns

SF

Direct SF Sublet SF




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