2009 Master Power Point Presentation

Welcome to the 5 Annual Commercial Real Estate Market Update th

Presented by

NAIOP-WI & CARW Market Update Program Emcee

Thomas Bernacchi, CPM Towne Investments

A special ‘Thank You’ to our generous Event Sponsors

Platinum Event Sponsor

Platinum Event Sponsor

Media Sponsor

Gold Event Sponsors

Corporate Sponsors

NAIOP-WI Gold Sponsors

CARW Corporate Sponsor

Corporate Sponsors NAIOP-WI Silver Sponsors • Bank Mutual • Outlook Development • TOLD Development • Towne Realty • Wangard Partners

NAIOP-WI Bronze Sponsors • BCI Group • Berghammer Construction • Chicago Title Insurance •CenterPoint Properties •GRAEF • Liberty Property Trust • Quarles & Brady • RA Smith •Sign*A*Rama • Whyte Hirschboeck Dudek

Retail Presenter

Michele Dugan, CCIM Mid America Real Estate

Office Presenters

Daniel J. Jessup, CCIM

Dan Wroblewski

Grubb & Ellis/Apex Commercial

Inland Companies

Industrial Presenters

James M. Young

Barry Chavin, SIOR

Colliers-Barry

NAI MLG Commercial

NAIOP-WI & CARW Market Update

2009 Market Update

NAIOP-WI & CARW Market Update

Retail Market Update

2009 Market Update - Retail

Michele Dugan, CCIM Mid America Real Estate

Retail Market Milwaukee: Size of the Market • •

According to Co-Star, Milwaukee ranks 25th relative to 65 other markets on a national basis. Milwaukee has approximately 34,256,969 square feet of shopping center space and we currently have a 11.2% vacancy rate.

Retail Market New Frontiers • • • • • • •

New areas seeing growth – Grafton, Waukesha and Kenosha. Why are these markets seeing growth? Barriers to entry. Housing starts. Demand for product. Repositioning of tenants. Mid-box & Big box generators.

Retail Market Grafton Commons - Grafton •

Retailers include: Costco, Kohl’s, PetsMart, Best Buy, Dick’s Sporting Goods, AAA, Steinhafel’s Mattress, Qdoba, Verizon, Michael’s, Kohler Credit Union and Aldi Foods.

Retail Market Grafton Commons

Retail Market Shoppes at Fox River - Waukesha •

Retailers include: Target, Pick N Save, CVS, Petco, Maurice’s, Famous Footwear, Chili’s, Five Guys, BW3’s, Noodles & Co, and GameStop

CARW 2009 Retail Deal of the Year

Retail Market Shoppes at Prairie Ridge - Kenosha •

Retailers include: JC Penny, PetsMart, Dick’s Sporting Goods, Target, Maurice’s, Tazinos, Cousin’s Subs, ULTA Cosmetics, FedEx, Starbucks, Cost Cutters and Verizon Wireless.

Retail Market Issues Effecting Commercial Retail Markets 1.

1.

Financing • Lack of new product – not enough tenants that are looking to expand or relocate. • Few new developments. • Loan to value (LTV) have increased from 80/20 to 55/45. Declining Store Openings • Starbucks – closed 600 stores in 2008-2009. • Target & Wal-Mart cut back on number of store openings overall. • Retailers’ focus is improving existing store sales.

Retail Market Issues Effecting Commercial Retail Markets 3.

Retailer Bankruptcy • Increasing supply of retail space – Former Linen’s and Things - Brookfield

Retail Market Issues Effecting Commercial Retail Markets • Circuit City – former Circuit City – South 76th Street

Retail Market Issues Effecting Commercial Retail Markets 4. Rental Rates • • • • •

Declining - over the past year rental rates have declined due to poor retailer sales per square foot. Landlords forced to reset rates for tenants to achieve a feasible health ratio. Existing tenants continue to struggle because sales per square foot have declined. Negative affect on landlords – struggling to pay their mortgage. Renegotiation of rental rates for existing tenants.

Retail Market Forecast – 2010 Challenges • • • • •

Few or no new shopping center developments. Additional store closings which will increase the supply of space. Financing – will continue to be difficult for both development financing and operational financing. Repositioning of tenants from B or C centers to A centers. Mountain of loans coming to maturity in 2010.

Forecast – 2010 Challenges

According to the latest Emerging Trends Report from the Urban Land Institute, “Shopping center owners operate in Darwinian mode. We are seeing triage among the B & C properties” trying to retain tenants.”

Retail Market

Forecast – 2010 Challenges Continued • •

Re-use and redevelopment of existing mid and big boxes. Consumer Confidence – University of Michigan Surveys of Consumers.

Retail Market Forecast – 2010 Challenges Continued • • • •

Consumer Confidence – University of Michigan Surveys of Consumers. The Index of Consumer Sentiment was 70.6 in the October 2009 survey, which is substantially above the 57.6 recorded last October. Report shared that consumers now put debt reduction and increased savings at the top of their agendas. Black Friday – According to the NRF, the average amount each consumer spent dropped to $343.31, down from $372.57 last year; total sales were flat at $42.1 billion.

Retail Market Forecast – 2010 Challenges Continued • Competition for every dollar - $$$. • Cap Rates. • More foreclosures in commercial real estate.

Forecast – 2010 Challenges Continued

Forecast – 2010 Challenges Continued Commercial Mortgage Defaults

Retail Market Forecast – 2010 Predictions - Signs of Life • •

Discount retailers and quick service restaurants continue to expand. Retailers that are actively expanding in the Milwaukee Metro:

Retail Market Forecast – 2010 Predictions - Signs of Life • •

Reuse of existing buildings/conversions. Unconventional uses are backfilling vacant retail spaces office & medical users.

Retail Market Forecast – 2010 Predictions - Signs of Life Example: Former Sentry Foods converted to a Gold’s Gym

Retail Market Forecast – 2010 Predictions - Signs of Life Example: Former Steinhafel’s converted to Froedtert & Medical College of Wisconsin

Before

Retail Market Forecast – 2010 Predictions - Signs of Life Example: Former Steinhafel’s converted to Froedtert & Medical College of Wisconsin

After

Retail Market Forecast – 2010 Predictions - Signs of Life Example: Former Sentry Foods – Oak Creek – converted to a TJ Maxx and Petco

Before

Retail Market Forecast – 2010 Predictions - Signs of Life Example: Former Sentry Foods – Oak Creek – converted to a TJ Maxx and Petco

After

Retail Market Forecast – 2010 – What you can do…. • • • • • •

Back to the basics. Survival of the fittest. React to deals and be open minded. Think outside the box. Unconventional times require hard work. Work with your bank.

NAIOP-WI & CARW Market Update

Office Market Update

Office Markets – West & South

Daniel J. Jessup, CCIM Grubb & Ellis/Apex Commercial

NAIOP-WI & CARW Market Update

Office West Market Update

Office Submarket West 2009 Statistics Total Universe

7,252,043 Square Feet

Occupied Space

6,126,690 Square Feet

Vacant Space

1,125,353 Square Feet

Vacancy Rate

15.52%

Absorption

-268,706 Square Feet

Office Submarket West Historical Statistics Office Submarket West 2005

2006

2007

2008

2009

Total Universe

6,967,076

7,192,790

7,227,535

5,927,538

7,252,043

Occupied Space

5,889,552

6,288,977

6,210,628

5,058,415

6,126,690

Vacant Space

1,077,524

903,813

1,016,907

869,123

1,125,353

Vacancy Rate

14.58%

12.57%

14.07%

14.66%

15.52%

Office Submarket West Historical Vacancy Rates (%) 16 14 12 10 8 6 4 2 0

2005

2006

2007

2008

2009

Office Submarket West Major Lease Transactions Rausch, Sturm, Israel & Horchik Law Firm – Maplewood Executive Center • 22,957 Square Feet Travelers Indemnity Insurance – Pinnacle I • 36,500 Square Feet Herzing University – 555 S. Executive Drive • 13,144 Square Feet M&I Bank – 235 N. Executive Drive • 44,000 Square Feet

Office Submarket West West Submarket Development • • • • • •

ATC Corporate Offices. Ridgeview Corporate Park. Single Tenant, Three-story, Class A office building. 152,000 Square Feet Completed September, 2009 Developer: Interstate Partners, Bill Schwartz.

Office Submarket West West Submarket Development • New fire station – Greenfield Avenue.

Office Submarket West West Submarket Development • New fire station – Calhoun Road.

Office Submarket West West Submarket Proposed Development •

Former Quebecor site on Bluemound Road finalist for Astronautics Headquarters.

Office Submarket West West Submarket Notable Trends • Run on fire stations. • F.I.R.E tenants are active.

Office Submarket West Last Year’s Predictions • Continued soft throughout 2009 with landlords needing to provide free rent and excess tenant improvement allowance to maintain their face rents.

2010 Outlook •

Continued soft throughout 2010 with landlords needing to provide MORE free rent and MORE excess tenant improvement allowances to maintain their face rents. • No speculative development. • Any new development preleased.

NAIOP-WI & CARW Market Update

Office South Market Update

Office Submarket South 2009 Statistics Total Universe

1,842,256 Square Feet

Occupied Space

1,535,705 Square Feet

Vacant Space

306,551 Square Feet

Vacancy Rate

16.64%

Absorption

-179,623 Square Feet

Office Submarket South Historical Statistics Office Submarket South 2005

2006

2007

2008

2009

Total Universe

1,843,725

1,843,725

1,976,451

1,747,829

1,841,125

Occupied Space

1,635,545

1,670,185

1,417,080

1,526,474

1,535,705

Vacant Space

208,180

173,540

177,317

221,355

306,551

Vacancy Rate

11.29%

9.41%

8.97%

12.66%

16.64%

Office Submarket South Historical Vacancy Rates (%) 18 16 14 12 10 8 6 4 2 0

2005

2006

2007

2008

2009

Office Submarket South South Submarket New Development Oakwood Park Commons • 4202 S. Oakwood Park Court, Franklin • Three-story, Class A, multi-tenant office/retail building • 50,427 total square feet • 23,046 square feet available

Office Submarket South South Submarket New Development Liberty Corporate Preserve I • 10050 S. 27th Street, Oak Creek • Single-story, Class A office building • 44,000 total square feet • 33,191 square feet available

Office Submarket South Major Lease Transaction Lakeshore Medical - 14,773 Square Feet • United States Air Force - 7,000 Square Feet • GSA – 12,100 Square Feet •

Office Submarket South South Market Information • New Inventory: 94,427 SF – 5.5% increase. • Absorption: -179,623 SF. • Smaller average tenant size. • Several years of available inventory based on historical data.

Office Submarket South Last Year’s Predictions • Increased leasing based on current level of interest, tours and RFP’s. • 440th Air Force Base land will have a positive impact on the market. • More talk about and maybe progress on rail.

Office Submarket South

2010 Outlook • • • •

Negative absorption likely to continue – hopefully at a much slower pace. Significant lease incentives with minimal velocity. KRM moving forward – likely no impact in 2010; future impact significant. Future of 440th Air Force Base still undecided; significant leasing obstacles to overcome.

Office Submarket South Office Market 2009 Notable Trends •

• • • • •

Market numbers likely worse than indicated. • Subleases not included. • Tenant excess capacity; 2009 staff reductions. • Excess capacity will slow the office market recovery. Landlords offering/preferring short term renewals with no TI costs. Stable tenants blending and extending; great opportunity to secure additional space for anticipated growth at reduced rates. Tenants are EXTREMELY aggressive. Significant lease incentives. Landlords aggressively pursue every prospect.

Office Submarket South How do we fix this? • Four letter word – JOBS! • Elect/Re-Elect pro-business leadership at all levels of government.

Office Markets – North & Central

Dan Wroblewski Inland Companies

NAIOP-WI & CARW Market Update

Office North Market Update

Office Submarket North 2009 Statistics Total Universe

4,317,719 Square Feet

Occupied Space

3,394,959 Square Feet

Vacant Space

922,760 Square Feet

Vacancy Rate

21.37%

Absorption -85,799 Square Feet

Office Submarket North Historical Statistics Office Submarket North 2005

2006

2007

2008

2009

Total Universe

4,600,905 4,274,894

4,423,995

4,418,909

4,317,719

Occupied Space

3,830,270 3,487,342

3,404,793

3,648,948

3,394,959

Vacant Space

770,635

787,552

1,019,202

769,961

922,760

Vacancy Rate (%)

16.75%

18.42%

23.04%

17.42%

21.37%

Office Submarket North Historical Vacancy Rates (%) 25 20 15 10 5 0

2005

2006

2007

2008

2009

Office Submarket North Major Lease Transactions Bryant & Stratton College – Bayshore Town Center • 37,000 Square Feet Restat – Liberty Park Place • 30,000 Square Feet ARI – Two Park • 20,000 Square Feet Kelly Services – Liberty Park Place • 20,000 Square Feet

Office Submarket North North Submarket Notable Trends •

The North Shore office market is beginning to compete for Downtown tenants more frequently. – Population growth in the North. – Tenants looking to reduce occupancy costs. – Some companies feel they no longer need a downtown office. – Bayshore effect.

•

If this trend continues, it will provide an additional avenue in growth for this submarket.

Office Submarket North North Submarket Notable Trends

•

Park Place submarkets lack of diversification causes constant instability during economic downturns. •Made up of large users. •No real small user options. •Large users flip-flop between Park Place buildings.

Office Submarket North Last Year’s Predictions • • •

Rental rates remain flat with increased concessions. – Rates down, concessions up. Continued positive absorption. – Did not occur. Cross pollination between three areas (East, Brown Deer and Northwest). In other words, any of the three areas can see tenants coming from the other 2 (which has not usually occurred).

Office Submarket North 2010 Outlook • Rental rates will hold at their already deflated levels with similar lease concessions. • We will see negative absorption again in 2010 in this submarket. enough to turn to the positive.

Recovering should begin in Q3/Q4 but not

NAIOP-WI & CARW Market Update

Office Central Market Update

Office Submarket Central 2009 Statistics Total Universe

15,470,375 Square Feet

Occupied Space

12,145,958 Square Feet

Vacant Space

3,324,417 Square Feet

Vacancy Rate

21.49%

Absorption -293,165 Square Feet

Office Submarket Central Historical Statistics Office Submarket Central 2005

2006

2007

2008

2009

Total Universe

15,791,221

15,794,356

16,192,174

14,948,519 15,470,375

Occupied Space

13,297,961

12,874,227

12,817,566

12,046,551 12,145,958

Vacant Space

2,493,260

2,920,129

3,374,608

2,901,968

3,324,417

Vacancy Rate

15.79%

18.49%

20.84%

19.41%

21.49%

Office Submarket Central Historical Vacancy Rates (%) 25 20 15 10 5 0

2005

2006

2007

2008

2009

Office Submarket Central Class Warfare: Class A vs. Class B • Downtown Class A vacancy: 10.46% (True Class A Towers) • Downtown Class B vacancy: 26.50%

Office Submarket Central Class Warfare: Class A vs. Class B • Class A rental rates, which dictate the overall market, have been getting compressed over the past 12-18 months. • Class A buildings are aggressively pursuing Class B tenants. • Well capitalized Class A buildings have an advantage. • Class B buildings have had to get extremely aggressive to remain relevant in this market. • The influx of short-term deals in Class B buildings is simply allowing them to buy time in the hope that a recovery is on its way.

Office Submarket Central There Are Opportunities • Educational users have been the most active segment in the Milwaukee market in 2009 leading to over 250,000 SF of new activity market wide. • There are a number of significant deals in the market today and some large lease expirations coming in the next 12-36 months that could lead to new development. • The recent flurry of short-term leases will lead to pent-up demand and an active future.

Office Submarket Central Last Year’s Predictions •

Downtown: Rates and occupancy will increase for A and well positioned B buildings. The rest of the market will remain slow with concessions for any new tenants. – Occupancy stable in Class A, rates were down. – Class B suffered across the board.

•

Mayfair: Rate and TI concessions will continue for the first half to ¾ of 2009 after which landlords will be able to remain more firm as occupancy increases. – Rates & TI concessions present all year. Has yet to stablize.

Office Submarket Central 2010 Outlook • We will hit the bottom in 2010 and start the slow climb back up. • Rental rates will begin to recover for Class A buildings in the 3Q/4Q, followed by the Class B rates. • Landlord concessions will continue at current levels throughout 2010. • We will see flat to slight negative absorption through Q1/Q2 as the economy struggles to recover. We will turn to the positive in the second half of the year.

Office Submarket Central

How do we fix this? •

•

•

Banks need to begin lending again.

Aggressive leadership in our local government.

Post-recession development trend of the past.

NAIOP-WI & CARW Market Update

Industrial Market Update

Industrial Markets – Central & West

Jim Young Colliers - Barry

NAIOP-WI & CARW Market Update

Industrial Central Market Update

Industrial Submarket Central 2009 Statistics Total Universe

23,717,565 Square Feet

Occupied Space

19,601,998 Square Feet

Vacant Space

4,115,567 Square Feet

Vacancy Rate

17.35%

Absorption

-16,130 Square Feet

Industrial Submarket Central Historical Statistics Industrial Submarket Central 2005

2006

2007

2008

2009

Total Universe

20,655,165

20,442,487

20,590,963

23,538,615

23,717,565

Occupied Space

17,881,277

18,329,302

18,077,078

19,902,731

19,601,998

Vacant Space

2,733,888

2,093,185

2,513,885

3,635,884

4,115,567

Vacancy Rate

13.24%

10.24%

12.21%

15.45%

17.35%

Industrial Submarket Central Historical Vacancy Rates (%) 18 16 14 12 10 8 6 4 2 0

2005

2006

2007

2008

2009

Industrial Submarket Central Central Building Sales • Primarily comprised of older buildings • Buyers faced with limited high quality inventory

Central Building Sales Goodwill Industries • • •

12121 W. Feerick St., Wauwatosa 65,240 Square Feet $2,400,000 ($36.79 SF)

Central Building Sales SRS Enterprises • • •

203 S. Curtis Road, West Allis 20,360 Square Feet $1,200,000 ($58.94 SF)

Central Building Sales Badger Trailer • • •

401 S. 3rd Street & 422 S. 4th Street, Milwaukee 2 Buildings – 54,273 Square Feet $1,023,000 ($18.85 SF)

Industrial Submarket Central Central Building Leases • Few noteworthy leases in this submarket – many smaller, short term transactions. • Quality buildings outperformed older inventory – Suburban markets offered competitive alternatives.

Central Building Leases Daily Direct • • •

4600 N. 124th Street, Wauwatosa 55,000 Square Feet $3.50 psf NNN

Central Building Leases ARG Machining • • •

4630 S. Brust Ave., St. Francis 16,050 Square Feet $8.50 psf NNN

Central Building Leases ILLCO, Inc. • • •

3930 W. Burnham St., Milwaukee 13,057 Square Feet $4.65 psf NNN

Industrial Submarket Central Last Year’s Predictions • Smaller tenants in the 5,000 to 10,000 SF are looking to buy. – Yes, but paralyzed by a fear of the market. • Smaller tenants yet, 2,000 to 3,000 SF are moving up from operations they’ve been running out of a garage or makeshift space and looking for functionality and some image (at a reasonable price). – Many remain in garages

Industrial Submarket Central Last Year’s Predictions Continued •

Some users were having us search to “flee” the market to be West of 124th Street – specifically for maintaining their business as a profitable venture. – Uncertainty about “sick leave” referendum, high tax climate and limited quality supply continued to push users N/S/W.

•

REDEVELOPMENT – displacement of existing tenants/owners. – Very limited due to condition of development market and unavailability of money.

•

Both real estate and our economy are cyclical (this is a time of opportunity). – Selective opportunity.

Industrial Submarket Central 2010 Outlook Static/absorption. No new speculative development due to land limitations. Strategic buys to reposition assets. Continued migration from central submarket to suburbs. – Price pressure on central submarket as value of suburban markets “steal” tenant/prospects. • Thinking positive. – Great values for tenants. – Buildings can be had at a discount. • Quality product will see activity but at a lower price point. • Concessions. • • • •

NAIOP-WI & CARW Market Update

Industrial West Market Update

Industrial Submarket West 2009 Statistics Total Universe

29,628,312 Square Feet

Occupied Space

27,557,970 Square Feet

Vacant Space

2,070,342 Square Feet

Vacancy Rate

6.99%

Absorption

65,293 Square Feet

Industrial Submarket West Historical Statistics Industrial Submarket West 2005

2006

2007

2008

2009

Total Universe

27,390,340 28,030,926

27,390,338

27,525,506 29,628,312

Occupied Space

24,663,980 25,328,745

23,373,020

25,865,997 27,557,970

Vacant Space

2,726,350

2,702,181

2,294,839

1,659,509

2,070,342

Vacancy Rate

9.95%

9.64%

8.38%

6.02%

6.99%

Industrial Submarket West Historical Vacancy Rates (%) 10 9 8 7 6 5 4 3 2 1 0

2005

2006

2007

2008

2009

Industrial Submarket West West Building Sales • 2009 was dominated by user transactions and limited investment sales compared to years past. • Key transactions – quality real estate.

West Building Sales Valeo-Prestwick • • •

5449 N. Executive Drive, Sussex 58,134 Square Feet $3,900,000 ($67.09 SF)

West Building Sales Painters Union • • •

S68 W22665 National Ave., Vernon 63,000 Square Feet $2,450,000 ($38.89 SF)

West Building Sales Denali Flavors • • •

3100 S. 166th Street, New Berlin 29,000 Square Feet $1,415,000 ($48.80 SF)

Industrial Submarket West West Building Leases • Few large leases done in 2009

West Building Leases Sunburst Apparel • • •

340 Maple Ave., Hartland 35,000 Square Feet $3.75 psf NNN

West Building Leases Tire Centers, Inc. • • •

16800 W. Ryerson Rd., New Berlin 42,000 Square Feet $3.95 psf NNN

CARW 2009 Industrial Deal of the Year

West Building Leases Friction Stir Link • 19775 W. Somer Dr., Brookfield • 35,000 Square Feet

Industrial Submarket West Last Year’s Predictions •

Cautious Optimism. – Very definitively.

•

Best areas for growth will be along the I-94 Corridor – Pewaukee and Pabst Farms. – Pabst has remained stagnant as good opportunities have become available closer to employee bases – further east.

Industrial Submarket West Last Year’s Predictions Continued • Slow growth in New Berlin, Muskego and Southern Waukesha County. – New Berlin/Muskego corridor is slow growth but the one area where we’re seeing speculative development. • Briohn and Luterbach. • Potential expansion of Buy Season space. • Relatively good leasing activity in the New Berlin/Muskego area on smaller sites.

Industrial Submarket West 2010 Outlook • Predicated on stabilized economy. • Continued drive to quality product. – Consolidation and image upgrade. • Continued trend of lower vacancy rate relative to past and other markets due to submarket constraints. – Limited speculative construction in 2007 and 2008. – Limited planned projects in 2009-2010. – Vacancy could rise to 8-9% if the market overall has not yet bottomed out. • Still well below other submarket vacancy rates. – Inconsistent velocity. • Symptom of overall market confidence.

Industrial Submarket West 2010 Outlook Continued • Great deals/compelling reasons to move. – Free rent. – Rental rate concessions.

Industrial Markets – North & South

Barry Chavin, SIOR NAI MLG Commercial

NAIOP-WI & CARW Market Update

Industrial North Market Update

Industrial Submarket North 2009 Statistics Total Universe

40,355,792 Square Feet

Occupied Space

35,881,442 Square Feet

Vacant Space

4,474,350 Square Feet

Vacancy Rate

11.1%

Absorption -619,243 Square Feet

Industrial Submarket North Historical Statistics Industrial Submarket North 2005

2006

2007

2008

2009

Total Universe

37,623,390

38,984,952

41,238,883

40,006,870 40,355,792

Occupied Space

33,565,000

34,996,792

37,336,849

36,766,302 35,881,442

Vacant Space

4,058,380

3,998,160

3,902,034

3,240,568

4,474,350

Vacancy Rate

10.79%

10.23%

9.46%

8.10%

11.1%

Industrial Submarket North Historical Vacancy Rates (%) 12 10 8 6 4 2 0

2005

2006

2007

2008

2009

Industrial Submarket North Now for the 2009 Highlights

It’s over!

Industrial North Notable Transactions Tramont Properties/Avergeris & Associates • • • •

3701 N. Humboldt Blvd., Milwaukee 172,344 Square Feet $3,000,000 ($17.40 SF) Brokered by The Dickman Company

Industrial North Notable Transactions

Coakley/Mirvac • • • •

3511 W. Green Tree Rd., Milwaukee 175,000 Square Feet $4,257,000 ($24.33 SF) Brokered by The Dickman Company & Colliers Barry

Industrial North Notable Transactions Holland Beauty Flower & Bulb Corp/ Carlisle Tire & Wheel Company • • • •

8480 N. 87th Street, Milwaukee 91,626 Square Feet $2,700,000 ($29.46/SF) Brokered by CBRE & The Boerke Company

Industrial North Submarket Last Year’s Predictions

Industrial Submarket North Last Year’s Predictions • • • •

In 2009, the industrial market will realize the negative absorption. Zero to negative absorption. New construction will be limited to Germantown, West Bend and Jackson. Rental concessions will increase as landlords compete for fewer deals.

Industrial Submarket North 2010 Outlook • We will turn the corner and have positive absorption. • New construction will occur but be limited to a few projects and owner occupied. • Rental rates will be pressured lower. Landlords will fight hard to retain tenants and attract new ones. • 2010 will truly be a TENANT/BUYER MARKET.

NAIOP-WI & CARW Market Update

Industrial South Market Update

Industrial Submarket South 2009 Statistics Total Universe

24,927,503 Square Feet

Occupied Space

21,902,625 Square Feet

Vacant Space

3,024,878 Square Feet

Vacancy Rate

12.1%

Absorption -578,720 Square Feet

Industrial Submarket South Historical Statistics Industrial Submarket South 2005

2006

2007

2008

2009

Total Universe

26,300,486

26,442,921

26,438,781

27,840,965 24,927,503

Occupied Space

24,567,860

24,150,521

23,225,368

24,372,829 21,902,625

Vacant Space

1,732,626

2,292,400

3,213,413

3,468,168

3,024,878

Vacancy Rate

6.59%

8.67%

12.15%

12.46%

12.10%

Industrial Submarket South Historical Vacancy Rates (%) 14 12 10 8 6 4 2 0

2005

2006

2007

2008

2009

Industrial South Notable Transactions Former Delphi Plant • •

7929 S. Howell Ave., Oak Creek 1,500,000 Square Feet

Industrial South Notable Transactions TechTrans/CenterPoint Properties • 5235 S. International Drive, Cudahy • 37,000 Square Feet • Brokered by CBRE & NAI MLG Commercial

Industrial South Notable Transactions CenterPoint Properties/Liberty Property Trust • • • •

Rexnord Building: 5150 S. International, Drive Cudahy 150,000 Square Feet $6,400,000 ($42.67/SF) Brokered by RFP Commercial

Industrial South Notable Transactions First Industrial/WE Energies • 7420 S. Howell Avenue, Oak Creek • 81,325 Square Feet • Brokered by CBRE

Industrial South Notable Transactions OPUS North/Yaskawa • 100 W. Oakwood Road, Oak Creek • 107,249 Square Feet • Brokered by RFP Commercial & The Boerke Company

Industrial Submarket South Last Year’s Predictions • •

South market will remain a tenant market Allowances and concessions will persist.

•

Growth will come from the South.

Industrial Submarket South 2010 Outlook • • • •

Absorption will occur. Very limited new construction as the market will need to absorb existing space. Downward pressure on lease rates and an increase in concessions. Velocity of deals will increase from 2009.

NAIOP-WI & CARW Market Update

Kenosha Market Update

Industrial Submarket Kenosha 2009 Statistics Total Universe

16,878,286 Square Feet

Occupied Space

14,383,895 Square Feet

Vacant Space

2,494,391 Square Feet

Vacancy Rate

14.8%

Absorption 108,062 Square Feet

Industrial Submarket Kenosha Notable Transactions Ozburn-Hessey Logistics/ Liberty Property Trust & Towne Investments • • • •

8691 109th Street, Pleasant Prairie 239,376 Square Feet – Brokered by Lee & Associates 8330 107th Street, Pleasant Prairie 54,000 Square Feet – Brokered by Lee & Associates

Industrial Submarket Kenosha Notable Transactions Uline Headquarters • • • •

I-94 and Hwy. Q 1,100, 000 Square Feet Distribution Center 200,000 Square Feet Office CenterPoint Properties Fee Developed Project

Industrial Submarket Kenosha Notable Transactions Arvato Digital Services/CenterPoint Properties • 8505 100th Street, Pleasant Prairie • 100,000 Square Feet • CenterPoint Properties leased to Arvato Digital • • • •

11500 80th Street Kenosha 400,000 Square Feet $17,600,000 ($44/SF) Brokered by Paine-Wetzel

Industrial Submarket Kenosha Market Last Year’s Predictions • Growth • Speculative Development

Industrial Submarket Kenosha 2010 Outlook • Increase velocity of deals compared to 2009. • Lower lease rates with more concessions. • Landlords will have a “live to fight another day” attitude.

Industrial Submarket Kenosha Kenosha Summary We are going to suck up space! •

Simplicize it all in 2010

2009 Commercial Real Estate Market Update Presented by

Thank You to our Sponsors!

Thank You to our Sponsors!

Corporate Sponsors

NAIOP-WI Gold Sponsors

CARW Corporate Sponsor

Corporate Sponsors NAIOP-WI Silver Sponsors • Bank Mutual • Outlook Development • TOLD Development • Towne Realty • Wangard Partners

Corporate Sponsors NAIOP-WI Bronze Sponsors •

BCI Group

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Berghammer Construction

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Chicago Title

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CenterPoint Properties

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GRAEF

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Liberty Property Trust

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Quarles & Brady

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RA Smith

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Sign *A* Rama

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Whyte Hirschboeck Dudek

Mark your calendar!

2010 Market Update Thursday December 9, 2010