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CBRE State of the Market: Mid - Year 2011 Second Quarter Washington, DC Regional Office Market

CBRE State of the Market:

Mid-Year 2011

Second Quarter Washington, DC Regional Office Market Statistics

June 30, 2011

CBRE State of the Market: Mid - Year 2011 Second Quarter Washington, DC Regional Office Market

Agenda Second Quarter 2011

Introduction Overview of Washington, DC Region In-depth Analysis of Quarter Northern Virginia Washington, DC Suburban Maryland National Overview and Outlook Questions

CB Richard Ellis | Page 2

Agenda Second Quarter 2011 Introduction Overview of Washington , DC Region In-depth Analysis of Quarter •

Speakers

Introduction Second Quarter 2011

Liz Wainger, Moderator John Germano, Executive Managing Director Marianne Swearingen, Research Manager Jon Southard, Principal and Director of Forecasting, CBRE Econometric Advisors

CB Richard Ellis | Page 3

Speakers Introduction Second Quarter 2011 • Liz Wainger, Moderator • John Germano, Executive Managing Director
Washington Metropolitan Re g ional Pers p ective Second Quarter 2011

Washington Metropolitan Regional Perspective

Second Quarter 2011

Washington Metropolitan Re g ional Pers p ective Second Quarter 2011
Northern Vir g inia Office Second Quarter 2011

Northern Virginia Office

Second Quarter 2011

Northern Vir g inia Office Second Quarter 2011

Northern Virginia

Historical Deliveries

Second Quarter 2011

2008 2006 2007 2009 2010 2.9M SF 6.1M SF 4.8M SF 5.5M SF 313K SF
2008
2006
2007
2009
2010
2.9M SF
6.1M SF
4.8M SF
5.5M SF
313K SF

CB Richard Ellis | Page 6

Historical Deliveries Second Quarter 2011 2008 2006 2007 2009 2010 2.9M SF 6.1M SF 4.8M

Northern Virginia

Development

Second Quarter 2011

Northern Virginia Development Second Quarter 2011 CB Richard Ellis | Page 7
Northern Virginia Development Second Quarter 2011 CB Richard Ellis | Page 7
Northern Virginia Development Second Quarter 2011 CB Richard Ellis | Page 7

CB Richard Ellis | Page 7

Northern Virginia Development Second Quarter 2011 CB Richard Ellis | Page 7

Northern Virginia

Historical Vacancy Rates

Second Quarter 2011

Historical Vacancy Rates Second Quarter 2011 CB Richard Ellis | Page 8

CB Richard Ellis | Page 8

Historical Vacancy Rates Second Quarter 2011 CB Richard Ellis | Page 8

Northern Virginia

Historical Trends

Second Quarter 2011

Northern Virginia Historical Trends Second Quarter 2011 CB Richard Ellis | Page 9 10 Y ear

CB Richard Ellis | Page 9

10 Y

ear

A

verage

N

t Ab

e

ti

sorp on:

2 431 892 SF

,

,

Northern Virginia Historical Trends Second Quarter 2011 CB Richard Ellis | Page 9 10 Y ear
Washin g ton , DC Office Second Quarter 2011

Washington, DC Office

Second Quarter 2011

Washin g ton , DC Office Second Quarter 2011
Historical Deliveries Second Quarter 2011

Washington, DC

Historical Deliveries

Second

Quarter

2011

Second Quarter 2011 2006 2007 2008 2009 2010 5.1M SF 2.5M SF 1.2M SF 6.0M SF
Second Quarter 2011
2006
2007
2008
2009
2010
5.1M SF
2.5M SF
1.2M SF
6.0M SF
2.9M SF

CB Richard Ellis | Page 11

Historical Deliveries Second Quarter 2011 Second Quarter 2011 2006 2007 2008 2009 2010 5.1M SF
Washington, DC Development Second Quarter 2011

Washington, DC

Development

Second

Quarter

2011

Second Quarter 2011

Washington, DC Development Second Quarter 2011 Second Quarter 2011 CB Richard Ellis | Page 12
Washington, DC Development Second Quarter 2011 Second Quarter 2011 CB Richard Ellis | Page 12
Washington, DC Development Second Quarter 2011 Second Quarter 2011 CB Richard Ellis | Page 12

CB Richard Ellis | Page 12

Washington, DC Development Second Quarter 2011 Second Quarter 2011 CB Richard Ellis | Page 12
Historical Vacancy Rates Second Quarter 2011

Washington, DC

Historical Vacancy Rates

Second

Quarter

2011

Second Quarter 2011

Historical Vacancy Rates Second Quarter 2011 Second Quarter 2011 CB Richard Ellis | Page 13

CB Richard Ellis | Page 13

Historical Vacancy Rates Second Quarter 2011 Second Quarter 2011 CB Richard Ellis | Page 13
Historical Trends Second Quarter 2011

Washington, DC

Historical Trends

Second

Quarter

2011

Second Quarter 2011

Historical Trends Second Quarter 2011 Second Quarter 2011 10-Year Average Annual Net Absorp tion: 1,700,383

10-Year Average Annual Net Absorption: 1,700,383 SF

CB Richard Ellis | Page 14

Historical Trends Second Quarter 2011 Second Quarter 2011 10-Year Average Annual Net Absorp tion: 1,700,383
Suburban Mar y land Office Second Quarter 2011

Suburban Maryland Office

Second Quarter 2011

Suburban Mar y land Office Second Quarter 2011

Suburban Maryland

Historical Deliveries

Second Quarter 2011 2007 2008 2009 2010 1 6M SF . 1 3M SF . 1
Second Quarter 2011
2007
2008
2009
2010
1 6M SF
.
1 3M SF
.
1 8M SF
.
0 SF

CB Richard Ellis | Page 16

Suburban Maryland Historical Deliveries Second Quarter 2011 2007 2008 2009 2010 1 6M SF . 1

Suburban Maryland

Development

Second Quarter 2011

Suburban Maryland Development Second Quarter 2011 CB Richard Ellis | Page 17
Suburban Maryland Development Second Quarter 2011 CB Richard Ellis | Page 17
Suburban Maryland Development Second Quarter 2011 CB Richard Ellis | Page 17
Suburban Maryland Development Second Quarter 2011 CB Richard Ellis | Page 17

CB Richard Ellis | Page 17

Suburban Maryland Development Second Quarter 2011 CB Richard Ellis | Page 17

Suburban Maryland

Historical Vacancy Rates

Second Quarter 2011

Historical Vacancy Rates Second Quarter 2011 CB Richard Ellis | Page 18

CB Richard Ellis | Page 18

Historical Vacancy Rates Second Quarter 2011 CB Richard Ellis | Page 18

Suburban Maryland

Historical Trends

Second Quarter 2011

Suburban Maryland Historical Trends Second Quarter 2011 CB Richard Ellis | Page 19 10-Year Average Net

CB Richard Ellis | Page 19

10-Year Average Net Absorption:

256,364 SF

Suburban Maryland Historical Trends Second Quarter 2011 CB Richard Ellis | Page 19 10-Year Average Net
The Economy And the National Perspective

The Economy And the National Perspective

The Economy And the National Perspective

DC Advantage Starts with Employment

Second Quarter 2011

DC Advantage Starts with Employment Second Quarter 2011 CB Richard Ellis | Page 21
DC Advantage Starts with Employment Second Quarter 2011 CB Richard Ellis | Page 21

CB Richard Ellis | Page 21

DC Advantage Starts with Employment Second Quarter 2011 CB Richard Ellis | Page 21

More Businesses Starting to Hire

Second Quarter 2011

Change in Payrolls (x1000): May 2010 to May 2011

Ed and Health 445 Admin 290 870 Thous Jobs Created Professional and Technical In Last 12
Ed and Health
445
Admin
290
870 Thous Jobs Created
Professional and Technical
In Last 12 Months
209
Leisure
202
Manufacturing
158
Retail
107
Transportation
96
Wholesale
87
Construction
0
Financial Activities
-28
Information
-34
Government
-
853
-1000
-800
-600
-400
-200
0
200
400
600

Source: Bureau of Labor Statistics.

CB Richard Ellis | Page 22

More Businesses Starting to Hire Second Quarter 2011 Change in Payrolls (x1000): May 2010 to May

Office Market Healing Nationally

Second Quarter 2011

Completions, Net Absorption, msf Vacancy, % 150 24 Forecast 100 20 50 16 0 12 -50
Completions, Net Absorption, msf
Vacancy, %
150
24
Forecast
100
20
50
16
0
12
-50
8
-100
4
-150
0
Completions (L)
Net Absorption (L)
Vacancy (R)
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Source: CBRE EA Office Outlook, Summer 2011.

CB Richard Ellis | Page 23

Office Market Healing Nationally Second Quarter 2011 Completions, Net Absorption, msf Vacancy, % 150 24 Forecast

Pricing Power Will Begin to Shift, But Slowly

Rent Inflation, %

Second Quarter 2011

Vacancy, %

15 21 Forecast 10 18 5 15 0 12 -5 9 -10 6 -15 3 Rent
15
21
Forecast
10
18
5
15
0
12
-5
9
-10
6
-15
3
Rent Inflation
Vacancy (R)
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Source: CBRE EA Office Outlook, Summer 2011.

CB Richard Ellis | Page 24

Pricing Power Will Begin to Shift, But Slowly Rent Inflation, % Second Quarter 2011 Vacancy, %

Industrial Availability Keeps Dropping

Net Absorption, Completions (msf)

Second Quarter 2011

Availability Rate (%)

150 18 Forecast 15 100 12 50 9 0 6 -50 3 -100 0 Completions (L)
150
18
Forecast
15
100
12
50
9
0
6
-50
3
-100
0
Completions (L)
Net Absorption (L)
Availability Rate (R)
2000.1
2001.2
2002.3
2003.4
2005.1
2006.2
2007.3
2008.4
2010.1
2011.2
2012.3
2013.4

Source: CBRE EA Industrial Outlook, Summer 2011.

CB Richard Ellis | Page 25

Industrial Availability Keeps Dropping Net Absorption, Completions (msf) Second Quarter 2011 150 18 Forecast 15 100

Lower Availability Will Start to Drive Rent Growth

Annual % in TW Warehouse

Rent Index

Second Quarter 2011

Availability Rate (%)

12 18 Forecast 8 15 4 12 0 9 -4 6 -8 3 -12 0 Rent
12
18
Forecast
8
15
4
12
0
9
-4
6
-8
3
-12
0
Rent Growth (L)
Availability Rate (R )
LT Availability Average
1
990
1
991
1
992
1
993
1
994
1
995
1
996
1
997
1
998
1
999
2
000
2
001
2
002
2
003
2
004
2
005
2
006
2
007
2
008
2
009
2
010
2
011
2
012
2
013
2
014
2
015
2
016

Source: CBRE EA Industrial Outlook, Summer 2011.

CB Richard Ellis | Page 26

Lower Availability Will Start to Drive Rent Growth Annual % ∆ in TW Warehouse Second Quarter

Questions?

Second Quarter 2011

CB Richard Ellis | Page 27

Questions? Second Quarter 2011 CB Richard Ellis | Page 27