Office. Office. IRR Viewpoint 2015

Transcription

1 IRR Viewpoint 05 Above: Designed in 95 in the Art Deco style by architect Timothy Pflueger as the Pacific Telephone and Telegraph Building, 40 New Montgomery Street, San Francisco, CA has been the subject of several IRR-San Francisco assignments. The office property sector continued its relatively steady recovery in 04, though the sector continues to lag behind other property sectors in the latest national recovery cycle. IRR s market cycle charts depict more local office markets both Central Business District (CBD) and Suburban mired in the recessionary phase and many more still just beginning a recovery. While some office markets have begun expanding, participants in others are being more cautious despite the fact that occupancy rates continue to rise nationally across all office classes (A and B) and locales (CBD and Suburban). After decades of suburban corporate campus building, a key national trend is the return to new CBD construction. IRR s markets across the U.S. report CBD markets are further along in the recovery process or even expanding again when compared to their Suburban counterparts. In many market areas, the return to favor of the CBD office markets has been attributed to the services industries becoming more technology-focused. The more techsavvy work force tends to be younger and seems to prefer a more populous work environment and the many social/cultural amenities that are typically developed to cater to this environment as opposed to the often more sterile environments found in many suburban locales. Transaction volumes in 04 continued to be robust, with most cities experiencing strong volume increases over fiveyear historical averages. Activity was notably strong in Cincinnati (9%), Boston (57%), Jacksonville (44%), San Francisco (%), and Philadelphia (up %). Transaction volumes were down in only a handful of cities, including Pittsburgh (-49%), Seattle (-6%), Cleveland (-5%), CBD Market Cycle (Fig. 8) Baltimore, MD Hartford, CT Jacksonville, FL Kansas City, MO/KS Memphis, TN Sacramento, CA Tulsa, OK Recovery Cincinnati, OH Columbia, SC Columbus, OH Indianapolis, IN Las Vegas, NV Long Island, NY New Jersey, No. Oakland, CA Phoenix, AZ Richmond, VA San Jose, CA Tampa, FL Boise, ID Denver, CO Houston, TX Charleston, SC New York, NY Philadelphia, PA Raleigh, NC San Francisco, CA Seattle, WA Atlanta, GA Birmingham, AL Charlotte, NC Cleveland, OH Detroit, MI Greenville, SC Los Angeles, CA Louisville, KY Orange County, CA Orlando, FL Providence, RI Syracuse, NY Washington, DC Expansion Austin, TX Boston, MA Broward-Palm Beach, FL Chicago, IL Dallas, TX Fort Worth, TX Miami, FL Minneapolis, MN Nashville, TN Pittsburgh, PA Portland, OR Salt Lake City, UT San Antonio, TX San Diego, CA Hypersupply Recession st stage within phase nd stage within phase rd stage within phase Dayton, OH Greensboro, NC Jackson, MS St. Louis, MO Wilmington, DE Decreasing Vacancy Rates Low New Construction Moderate Absorption Low/Moderate Employment Growth Neg/Low Rental Rate Growth 04 Integra Realty Resources, Inc. Decreasing Vacancy Rates Moderate/High New Construction High Absorption Moderate/High Employment Growth Med/High Rental Rate Growth Increasing Vacancy Rates Moderate/High New Construction Low/Negative Absorption Moderate/Low Employment Growth Med/Low Rental Rate Growth Increasing Vacancy Rates Moderate/Low New Construction Low Absorption Low/Negative Employment Growth Low/Neg Rental Rate Growth 7

2 IRR Viewpoint Market Conditions and 05 Forecasts: Central Business District (Table 9) CLASS A & B CLASS A & B AVG FORECAST EST CLASS A & B EST CLASS A CLASS A CLASS B CLASS B TOTAL WEIGHTED ANNUAL NET AVG ANNUAL EST CLASS A MARKET MARKET EST CLASS A & B INVENTORY VACANCY INVENTORY VACANCY INVENTORY VACANCY ABSORP. NET ABSORP. CONST. TI RENT RENT EXPENSE YEARS TO MARKET AREA (SF) RATE (%) (SF) RATE (%) (SF) RATE (%) 0-04 (SF) (SF) (SF) ($/SF) ($/SF) CHANGE (%) GROWTH (%) BALANCE* Atlanta, GA,049, % 5,64, % 6,, % , %.50% 4 5 Austin, TX 6,45, %,50,000.50% 8,98, % 66,750 47,8 60, %.00% Baltimore, MD 5,44,000.60% 5,64, %,076,000.04% 99,700 4, %.50% 5 Birmingham, AL,8, %,54,000.00% 5,57, % 9,000 8, %.00% IB Boise, ID,, %,686,494.9% 5,09,449 9.% 05,000, %.50% IB Boston, MA 7,000, % 5,000, % 6,000, %,00,000,00, , %.00% IB IB Broward-Palm Bch, FL,450, % 7,00, % 49,750, % 400, ,000 5, %.50% Charleston, SC,009, % 886, %,896, % 5,000 5,000 80, %.00% IB IB Charlotte, NC,68,099.40%,46, % 6,784,89.5% 0, , , %.00% 4 Chicago, IL 7,000,000.80% 46,000, % 7,000, % 8, 500,000,500, %.50% 4 Cincinnati, OH 7,00, % 5,000, %,00, % , %.50% 5 8 Cleveland, OH 0,500, %,700,000.80% 4,00, % 00,000 50,000 00, %.00% Columbia, SC,890, % 7,460, % 9,50,000 8.% 85,000 5, %.00% IB Columbus, OH 9,500,000.00%,800, %,00, % 60,000 70,000 00, %.00% IB IB Dallas, TX,640, % 8,56, %,57, % 60,750 50, , %.00% 5 5 Dayton, OH,950, % 7,700, % 9,650,000.97% %.00% 0 0 Denver, CO 0,9,66.40% 0,6, %,5,9.8% 75, ,000 00, %.00% IB Detroit, MI 0,500, % 6,500, % 7,000, % 85, , %.00% IB Fort Worth, TX 5,855, % 4,407,59 9.0% 0,6,488.94% 8,000 44,, %.00% Greensboro, NC 5,664, %,68, % 7,47, % 50,000 75,000 5, %.00% Greenville, SC,00, % 4,440, % 6,640, % 00,000 00,000 5, %.00% IB Hartford, CT 6,550,000.00%,550,000.00% 8,00,000.00% %.00% 4 4 Houston, TX,444, % 5,6, % 46,660, % 68,54 50,000,464, %.50% Indianapolis, IN 6,05, %,755, % 0,06,80 8.%, %.00% 4 4 Jackson, MS,500, % 4,000, % 6,500,000 7.% 50,000 0, % 0.00% 4 7 Jacksonville, FL 7,500, % 6,600,000.90% 4,00,000 5.% 50,000 5, %.50% 5 6 Kansas City, MO/KS 5,460, % 8,540, % 4,000, % 75,000 50, %.00% 4 Las Vegas, NV,5,50 5.0% 946,4.70%,99,84 0.5% 6,46 00,000 9, %.00% IB 5 Long Island, NY,4,004.70% 4,0,48.0% 7,44,5.97% - - 5, %.50% 5 Los Angeles, CA 8,400, % 8,940,000.5% 57,40, % 5,000 75,000 85, %.50% Louisville, KY,78, % 5,040, % 8,9,4.45% 8,500 50, %.00% IB Memphis, TN,000,000.00% 4,600, % 6,600,000.64% %.50% 5 + Miami, FL 9,50, % 6,680, % 5,90, % 75,000 98,5 75, %.00% IB Minneapolis, MN,00, %,00, %,400,000.05% 40, , %.50% IB Nashville, TN,500, %,600, % 7,00, % 00,000 5,000 00, %.50% IB New Jersey, No. 0,00,000.0%,800,000.0%,900,000.% 8,7 00, , %.00% New York, NY 04,000, % 56,000, % 60,000, %,00,000,85,000,756, %.00% Oakland, CA 8,597,7 0.50% 9,,8.40% 7,7,06.48% 8,5 (6,864) 8, %.00% Orange County, CA 4,49, % 5,875,06.00% 87,67,96.54%,75,46 55,866 9, %.00% Orlando, FL 5,55, %,576, % 8,8,70 6.9% 8,750 8,49 48, %.50% 6 6 Philadelphia, PA 7,498,55.50% 7,55, % 55,05,59 0.9% - -,96, %.50% Phoenix, AZ 9,64, % 0,0,554.00% 9,665,00.74%,50, , %.00% Pittsburgh, PA,09, % 4,544, % 46,68,8 7.97% 00,000 00,000,00, %.50% IB IB Portland, OR,999,6 9.90% 4,0, % 6,0,5 8.55% 4,55 50,000 00, %.00% IB IB Providence, RI,5,000.5%,800, % 5,05, % 99,000 4,000 05, %.00% Raleigh, NC 5,00, %,00, % 7,00, % 00,000 50,000 50, %.00% IB IB Richmond, VA 6,400, % 0,600, % 7,000,000.8% 60,000 75,000 50, %.50% IB Sacramento, CA 9,78, % 5,606,000.70% 4,784,000.58% 5,000 00, %.50% 4 Salt Lake City, UT,900,000.50%,00, % 6,00,000.98% 00,000 5, , %.00% San Antonio, TX,994,70 8.0%,759, % 4,754, % 8,98 8, %.00% IB 5 San Diego, CA 6,68,645.0% 4,577,06.0% 0,745,95 6.0% 95,480 50,000 00, %.00% IB San Francisco, CA 4,49,7 8.60%,776, % 54,96,50 8.8% 8,4 5,89 5,98, %.00% IB IB San Jose, CA 4,65, % 9,79,9.70% 4,446,94.44% 6,98 88, %.00% Seattle, WA 4,470,94.0% 0,550,98.60% 65,0,97.% 650,000 65,000,5, %.00% St. Louis, MO 5,400, % 7,400,000.50%,800, % 0,000 0, %.00% 8 8 Syracuse, NY,946, % 4,89, % 6,5, % 6,000 4, %.00% Tampa, FL 4,790,657.90%,4, % 8,05,8.50% 5, , %.50% Tulsa, OK 6,07, %,98,000.50% 0,89, % 57,500, %.50% + Washington, DC 90,97,00.0% 49,77,500.90% 40,744,700.45%,46,400,85,00,45, %.50% 5 Wilmington, DE 7,00,000.00% 5,00, %,500, % 0,000 0, %.00% 7 + Totals/Simple Avgs:,00,970,58.94% 775,99, %,777,96,8 4.% 8,06,099 6,67,5 0,68, %.47%.. Weighted Averages:.%.0%.58% Integra Realty Resources, Inc. IB signifies markets in balance. 8

3 IRR Viewpoint 05 Hartford (-6%), and Richmond (-5%). In terms of relative market activity sizes, Philadelphia jumped upward (seven places, from 0 to ), while Boston s shift (four places, from seven up to three) and San Francisco s (three places, five up to two) were more muted but equally impressive given the higher starting basis. In fact, San Francisco leapfrogged Los Angeles to become the second most active office market in 04, while Boston surpassed Chicago and Houston to become the third most active for the year. Pricing trend indicators were somewhat varied and often dependent on some product class differentials within the sample sets, especially for the CBD sector. That being said, material price increases were notable in the Suburban sector in St. Louis (59%), the Inland Empire (58%), Jacksonville (50%), Palm Beach (49%), Austin (4%), San Jose (4%), and Columbus (%). While developers and investors seemingly prefer the CBD office property sector, property fundamentals for the Suburban office sector strengthened just as much as those in the CBD sector nationally in 04. CBD office space saw its vacancy rate for Class A product dip from.6% (weighted) in 0 to.% in 04, while Class B gains were similar dropping from.7% to.0%. Weighted Suburban Class A vacancy rates reduced from 5.65% to 4.6% and Class B vacancy fell from 4.7% to 4.5%. These occupancy improvements are deemed by IRR to have brought CBD product within. years and. years, respectively, of stabilizing at the current pace for Class A and Class B product types. Suburban product is now expected to stabilize sooner as well, with Class A and Class B product expected to reach equilibrium in. and.9 years. As such, Suburban product is deemed to have progressed toward stabilization at a slightly faster pace than predicted by IRR in 0, while the pace dropped off slightly from the previous year s expectations for the CBD sector. Notably, these changes in stabilization expectations reversed the trend from the previous few years and indicated that the Suburban office sector nationally is more Top 5 Markets by Transaction Rate (Fig. 0) San Francisco, CA $ East Bay $. 9 9 Los Angeles, CA $ Orange County, CA $ San Diego, CA $ Size in $ Billions Seattle, WA $ Rank Increase Rank Decrease San Jose, CA $ Denver, CO $ Ranking 04 Ranking Phoenix, AZ $ st Pentile nd Pentile rd Pentile 4th Pentile 5th Pentile 0% 0% 40% 60% 80% 00% Minneapolis, MN $ Dallas, TX $ Austin, TX $.7 6 Manhattan, NYC $0.0 Chicago, IL $ Washington DC $ Atlanta, GA $.4 0 Houston, TX $ Boston, MA $ Stamford, CT $ Broward County, FL $ NYC Boroughs $.0 North NJ $.0 Philadelphia, PA $.09 0 Charlotte, NC $0.97 Miami, FL $ Integra Realty Resources, Inc. U.S. Tertiary Markets are excluded 04 Transaction Volume is annualized as of Q 04 Source: Real Capital Analytics, compiled by IRR 9

4 IRR Viewpoint 05 Regional Rates Comparison - Class A (Fig. ) Regional Rates Comparison - Class B (Fig. ) Cap Rate Non-weighted regional/national average figures 04 Integra Realty Resources, Inc. Rate Reversion Rate Cap - Rate 04 Cap Rate South Region CBD 7.5% 8.40% 7.76% + 6 bps - 4 bps Suburban 7.6% 8.80% 8.8% + 9 bps - 7 bps East Region CBD 6.80% 7.8% 7.9% +0 bps - 7 bps Suburban 7.7% 8.4% 7.9% + 97 bps - 7 bps Central Region CBD 8.6% 9.9% 8.68% + bps - bps Suburban 7.95% 9.4% 8.50% + 8 bps - 8 bps West Region CBD 6.% 7.88% 6.84% + 65 bps - 4 bps Suburban 6.7% 8.9% 7.0% + 56 bps - 9 bps National Averages /Spreads CBD 7.05% 8.4% 7.6% + 9 bps - bps Suburban 7.4% 8.65% 7.99% + bps - 5 bps Cap Rate Rate Non-weighted regional/national average figures 04 Integra Realty Resources, Inc. Reversion Rate Cap - Rate 04 Cap Rate South Region CBD 8.04% 9.% 8.59% + 8 bps - bps Suburban 8.% 9.9% 8.8% + 7 bps - 4 bps East Region CBD 7.80% 8.89% 8.8% +0 bps - 4 bps Suburban 8.% 9.% 8.6% +00 bps - bps Central Region CBD 8.8% 0.05% 9.4% + bps - 6 bps Suburban 8.64% 9.68% 9.% + 05 bps + bps West Region CBD 6.79% 8.4% 7.8% + 64 bps - 5 bps Suburban 7.6% 8.80% 7.8% + 55 bps - 9 bps National Averages /Spreads CBD 7.84% 9.% 8.40% + 8 bps - 6 bps Suburban 8.06% 9.6% 8.6% + 0 bps - 7 bps likely to stabilize before the CBD sector, albeit at materially lower rental rates and marginally lower occupancy rates. In terms of capitalization rates, the office sector s fiveyear contractionary trend continued in 04, with CBD capitalization rates dropping at a faster pace than Suburban rates for the third consecutive year. Nationally, CBD cap rates contracted and 6 basis points, respectively, for Class A and Class B product types in 04. As noted, Suburban rate contraction was more muted at 5 and 7 basis points, respectively, for Class A and Class B assets. These movements brought Class A CBD capitalization rates to an all-time low, while Suburban Class A capitalization rates are approaching their 007 all-time low. The real estate risk premium for office assets also decreased for the third consecutive year, but still has a long way to go before approaching the lows of strong in 05, though the potential for rising interest rates may put pressures on the sector as companies pare back investment activity. Some of the markets more reliant upon energy employment may also experience a dip in 05 if energy prices continue to fall, but overall fundamentals and investor demand will remain strong, especially in the CBD sector. Class A Capitalization Rates (Fig. ) While capitalization rates contracted nationally across product types and region, this trend was not quite universal in either its pace or directionality. Class A capitalization rates contracted at a materially stronger pace in the South than they did in the rest of the country s regions, where the contractionary trend was more muted and similar in nature. For Class B product, the trend was more muted across all regions for CBD product and the Central region even reported the slightest reversal of the contractionary trend with Class B Suburban capitalization rates rising by one basis point. IRR will be closely monitoring this trend in 05 to see if it is a leading indicator of a shift in market direction or simply an aberration in a moderately sized transaction sample set. Cap Rate (%) Risk Premium (%) Overall, the office sector continued its recovery at a measured pace. Expectations for the sector remain 0 Suburban 04 Integra Realty Resources, Inc. CBD 0-Year Treasury Spread

5 IRR Viewpoint Market Conditions and 05 Forecasts: Suburban Market Area (Table 4) CLASS A & B CLASS A & B AVG FORECAST EST CLASS A & B EST CLASS A CLASS A CLASS B CLASS B TOTAL WEIGHTED ANNUAL NET AVG ANNUAL EST CLASS A MARKET MARKET EST CLASS A & B INVENTORY VACANCY INVENTORY VACANCY INVENTORY VACANCY ABSORP. NET ABSORP. CONST. TI RENT RENT EXPENSE YEARS TO MARKET AREA (SF) RATE (%) (SF) RATE (%) (SF) RATE (%) 0-04 (SF) (SF) (SF) ($/SF) ($/SF) CHANGE (%) GROWTH (%) BALANCE* Atlanta, GA 7,7, % 5,450, % 6,8, % 79,000,000,000,000, %.50% 4 4 Austin, TX 7,000, % 4,4, %,4,000.7% 40,50 894,667,878, %.00% Baltimore, MD 7,5,000.0% 6,,400.70% 6,6,400.44% 77,00 860,800 40, %.50% 4 6 Birmingham, AL 5,08,000.90% 7,49, %,575, % , %.00% 5 Boise, ID 6,49,86.0% 8,0,60.40% 4,5,48.86% 75, ,000 50, %.50% Boston, MA 57,000, % 45,000, % 0,000, %,50,000,000,000,000, %.00% 4 Broward-Palm Bch, FL 8,480, % 55,00, % 7,580,000 7.% 04, ,000 75, %.50% IB Charleston, SC,689,50 7.4% 4,90,7.76% 7,879, % 0,000 5,000 46, %.00% IB Charlotte, NC 4,5,747.00% 7,990, %,5,5.74% 00, ,000 5,500, %.00% 4 Chicago, IL 64,000,000.00% 49,800,000.80%,800,000.5% , %.00% 8 0 Cincinnati, OH 0,900, %,600, %,500, % 80, , %.50% 6 0 Cleveland, OH,700,000.0% 40,900,000.70% 5,600,000.4%,00, ,000 00, %.00% Columbia, SC,050, %,00, % 4,50, % 50,000 50,000 85, %.00% IB Columbus, OH 7,900,000.00% 8,000, % 45,900, % 00,000 50, , %.00% IB IB Dallas, TX 9,68,48.6%,98,46 4.7% 0,566, % 54,0,84,750 4,498, %.00% 4 4 Dayton, OH,500, % 7,00, % 0,700, % 80,000 90,000 00, %.00% 4 4 Denver, CO 40,667,46.0% 9,06,770.0%,684,.4%,0,49,00,000,500, %.00% IB Detroit, MI 60,000, % 09,000, % 69,000, %,950,000,50,000 50, %.00% IB Fort Worth, TX,0, % 6,,4.7% 47,6,7.4% 4,98 00,000,7, %.00% Greensboro, NC 9,574, % 9,576, % 9,50, % 00,000 5,000 40, %.00% Greenville, SC,970, % 5,00, % 9,70, % 50,000 75,000 75, %.00% IB IB Hartford, CT 4,80, %,65, % 7,905, % , %.00% Houston, TX 85,785, % 05,8, % 9,608,46.%,068,766,450,000 6,45, %.50% IB Indianapolis, IN 0,8, % 8,0, % 8,549, %,000 40,000 5, %.00% 4 Jackson, MS 4,000, % 9,000, %,000,000.46% 50,000 00,000 75, % 0.00% IB Jacksonville, FL 9,00, %,950,000.0%,50,000.7% 550, , , %.50% Kansas City, MO/KS,78,000.00%,809,0.60% 5,590,0.40% 0,000 5,000 75, %.00% Las Vegas, NV 8,677,85 6.8%,0, % 9,70,8 5.80% 09,88 00,000 85, %.00% 6 6 Long Island, NY 5,599,09.% 8,9,5 5.70%,88,56 4.4% 65,47-5, %.50% 5 Los Angeles, CA 76,700, % 5,700, %,400, %,74,000,60, , %.50% Louisville, KY 5,8,96.00% 8,769, %,998,795 6.% 95,000 4,000 50, %.00% IB IB Memphis, TN 9,600, %,00,000.00%,700, % 775,000 50, , %.50% 5 Miami, FL 7,50, % 56,00,000.50% 7,450,000.74% 550,000 6,875 00, %.00% IB Minneapolis, MN 6,650, % 5,400, % 70,050, % 500, ,000 40, %.50% Naples, FL,597, % 4,50,80.80% 7,00,55.7% 60,000 50,000 00, %.00% Nashville, TN 0,500, %,500,000.00%,000, % 50,000 5, , %.50% IB New Jersey, Coastal 5,695, %,5,000.75% 7,7,000.80% 90,000 50,000 75, %.75% New Jersey, No. 7,700, % 97,500,000.90% 5,00, % 809,94 600,000 69, %.00% 5 7 New York, NY 0,96,58.40%,584, %,88,96 0.0% , %.00% 5 7 Oakland, CA 8,085,54.0% 77,55,5.0% 95,40,765.07% 504,57 55,884 57, %.00% Orange County, CA 0,477,5 4.0%,05, % 4,49,54.67%,76,7 7,74 44, %.00% Orlando, FL 9,7,4 6.00% 45,7,57.70% 65,45,600.00% 48,000 76,76 50, %.50% 7 7 Philadelphia, PA 9,69,85.40% 56,66,80.60% 48,996,05.7%,04,557,50,000,09, %.50% Phoenix, AZ,054, % 86,0, % 8,086, % 8,750,000 0,000,000,500, %.00% Pittsburgh, PA,47,8 9.0% 6,099, % 49,46,0 8.7% 65, , , %.50% IB IB Portland, OR 5,667, 0.0%,6, % 7,804,66 8.8% 667,09 575, , %.00% IB IB Providence, RI,950, % 4,600, % 6,550, % 9,000 7,000 55, %.00% Raleigh, NC 5,000, % 5,600, % 40,600,000.84% 00, ,000,00, %.00% 5 Richmond, VA,800,000.0% 5,00, % 9,00, % 0,000 5, , %.50% Sacramento, CA 7,7,000.00% 9,78, % 56,99, % 95, ,000 00, %.50% 4 5 Salt Lake City, UT 7,550, % 9,500,000.5% 7,050, %,00, ,000,500, %.00% IB San Antonio, TX 7,9,5 9.0%,44, % 0,76, % 68,97 55,55,50, %.00% IB 5 San Diego, CA 7,005, % 50,67,75.70% 77,678,8.59%,5,6 700, , %.00% IB San Francisco, CA,459, % 7,85, % 05,745, %,4,69,58,496,570, %.00% IB IB San Jose, CA 8,446, % 75,58,78 9.0% 9,805, %,6,4,8,00,05, %.00% IB IB Sarasota, FL,46, %,79, % 5,08,99 0.5% 8,800 5,000 0, %.00% Seattle, WA,85,5 0.00% 65,999, % 89,84,66 9.6% 90, ,000 64, %.00% IB IB St. Louis, MO 6,00, % 6,000, %,00,000.98%,600 00, , %.00% 4 Syracuse, NY,80,545.80%,990, % 5,80, % %.00% Tampa, FL 8,46,460.0% 6,5, % 90,99, % 465, , , %.50% Tulsa, OK,9,000.90% 7,8, % 0,95, % 4,400 4,05 00, %.50% Washington, DC 47,4, % 09,550, % 56,69, % 8,0 5,400,468, %.50% 5 5 Wilmington, DE 7,00, %,700,000.00% 8,800,000.% 50,000 0,000 00, %.00% 4 7 Totals/Simple Avgs:,68,64,98.0%,67,8, 4.4% 4,8,760,5.7% 4,589,956 46,905,9 65,5, %.58%..9 Weighted Averages: 4.6% 4.5% 4.9%.0 04 Integra Realty Resources, Inc. IB signifies markets in balance.

6 IRR Viewpoint Market Conditions and Forecasts: Central Business District (Table 9) CLASS A & B CLASS A & B CLASS A & B CLASS A & B CLASS A & B AVG ANNUAL FORECAST ESTIMATED CLASS A CLASS A CLASS B CLASS B TOTAL WEIGHTED NET ABSORP. AVG ANNUAL YEARS TO INVENTORY VACANCY INVENTORY VACANCY INVENTORY VACANCY RATE 00-0 NET ABSORP. BALANCE MARKET AREA (SF) RATE (%) (SF) RATE (%) (SF) (%) (SF) (A/B) Atlanta, GA,049, % 5,64, % 6,, % -577, ,000 / Austin, TX 6,584, %,545,8 5.00% 0,9, % 55,950 9,040 / Baltimore, MD 9,0, %,905,000.50%,07,000.% 0,000-40,000 / 5 Birmingham, AL,8, %,54, % 5,57, % 65,000 0,000 / Boise, ID,9, %,667,70.58% 4,859, % 0 0 / 4 Boston, MA 7,000,000.50% 5,000,000.50% 6,000,000.69% 0 0 / Broward County, FL,450, % 7,00, % 49,750, % 45,6 85, / Charleston, SC 957, %,74,475 0.%,, % 5,000 5,000 N/A Charlotte, NC,68,099.40%,45, % 6,80,899.8% -, 0 / 4 Chicago, IL 54,000,000.00% 44,000, % 98,000, % 4,45-4,47 / 4 Cincinnati, OH 7,000, % 8,500, % 5,500, % 75,000 50,000 / Cleveland, OH 8,900, % 5,00, % 4,00,000.7% -59,500 0,000 / 4 Columbia, SC,860,000.00% 5,694, % 8,554, % 0 0 / Columbus, OH 9,480,000.00%,660, %,40, % 00,000 75,000 / Dallas, TX,66, % 8,58,889.40% 0,895,70 7.7% -4,000 85,667 6 / 6 Dayton, OH,900, % 7,700, % 9,600, % 0 60,000 0 / + Denver, CO 0,6,0.70% 0,797,88.0%,48,94.% 0,000 90,000 / Detroit, MI 4,500, % 575, ,000 / Fort Worth, TX 5,7,65.80% 4,40,00.0% 0,4,65.6% -0,50 88,667 / Greensboro, NC 5,90, % 847,99.0% 6,08,07 7.6% 0 0 / 8 Greenville, SC,55, %,5, % 4,590,000.7% 85,000 00,000 / Hartford, CT 6,57,000.0%,575, % 8,46,000.7% / 5 Houston, TX,840, % 9,890,000.50% 5,70, % -0,000 0,000 / Indianapolis, IN 6,06, %,756, % 0,06,000 8.% -85,594 80,000 / Jackson, MS,500, % 4,000, % 6,500, % / 8 Jacksonville, FL 6,850,000.40% 6,500, %,50,000.69% 45,000 50,000 / 0 Kansas City, MO/KS 5,460, % 8,540, % 4,000,000 8.% 55,000 50,000 4 / 5 Las Vegas, NV 4,007,95 6.0% 946,4 7.90% 4,954,56 8.5% 45,859 0,000 / 4 Los Angeles, CA 7,97, % 9,4,8.00% 57,7, % -50,000 00,000 5 / 0 Louisville, KY,804, %,05, % 4,80, % -50,000 50,000 / Memphis, TN,009, % 4,684, % 6,694,79.89% 5,000 5,000 5 / + Miami, FL 9,50, % 9,600, % 8,850, % 7,78,868 / Minneapolis, MN 6,79, % 0,898, % 7,77, % 80,000 00,000 / Nashville, TN,00, %,600, % 6,800, % 50,000 00,000 / New Jersey, Northern 9,000, %,000,000.00%,000, % 00,000 5,000 / New York, NY 55,000, % 90,000, % 45,000,000 9.% 0,000,000 5,000,000 / Oakland, CA 8,590, % 9,085,89.44% 7,675, % -,57 7 / Orange County, CA 4,780, % 40,66, % 8,46, % -56,6 07,000 5 / Orlando, FL 4,94, %,9, % 6,587, % -8,50 05,000 / Philadelphia, PA 6,900,000.80% 7,785, % 54,685, % 0 0 / Phoenix, AZ 9,66,0.00% 0,00, % 9,76, % 5,000 00,000 / 4 Pittsburgh, PA 7,08,4 8.00%,49, % 8,87, % 7,69 00,000 N/A / 5 Portland, OR,870, % 4,,7 8.90% 6,04,08 9.% 7, 60,000 4 / Providence, RI,890,000.00%,5, %,5,000.79% 7,000 88,000 / Raleigh, NC,500, %,77, % 5,7, % 5,667 0 / Richmond, VA 5,00, % 9,500,000.0% 4,700, % 0,000 50,000 / Sacramento, CA 9,064, % 0,00,987.70% 9,65,47.5% -77,9 49,84 / Salt Lake City, UT 4,40, % 6,60, %,00, % -50,000 50,000 / San Antonio, TX,6,000.70%,659, % 4,985, % -47,666 7,000 0 / 0 San Diego, CA 5,88,6.60% 5,0, % 0,984, % -0,000 50,000 / San Francisco, CA 4,50, % 4,786,69.60% 56,06, % 506,0 4,980 / San Jose, CA 4,649,64 7.4% 9,645,87.96% 4,94,8 4.9% 5,67,484 / Seattle, WA 4,44,000.00% 0,47, % 64,56,000.6% 775, ,000 / St. Louis, MO 5,400, % 6,00, %,600,000.8% 0, / 0 Syracuse, NY,946,000.0% 4,89, % 6,5, % -50,000 50,000 / 5 Tampa, FL 4,4,000.40%,909, % 7,0, % 6,500 5,000 / Tulsa, OK,88,6 5.80%,9,06.40% 6,000, % 00,000 50,000 / + Washington, DC 8,4,000.00% 49,8, % 0,59,000.6%,60,000,80,000 / 5 Wilmington, DE 7,00, % 5,00, %,500, % 95,000 90,000 8 / + Totals / Simple Average 899,97,75 4.5% 765,6, %,650,04, % 56,069 55,057. / 4.8 Weighted Average.6%.7%.7% 0 Integra Realty Resources, Inc. 0

7 IRR Viewpoint 04 CLASS A & B CLASS A & B CLASS A & B CLASS A & B CLASS A & B AVG ANNUAL FORECAST ESTIMATED CLASS A CLASS A CLASS B CLASS B TOTAL WEIGHTED NET ABSORP. AVG ANNUAL YEARS TO INVENTORY VACANCY INVENTORY VACANCY INVENTORY VACANCY RATE 00-0 NET ABSORP. BALANCE MARKET AREA (SF) RATE (%) (SF) RATE (%) (SF) (%) (SF) (A/B) Atlanta, GA 7,007, % 5,450, % 6,457, % -,486,000,0,000 / Austin, TX 6,99,8.00% 4,98, % 40,498,069.50% 69,8 577,89 / Baltimore, MD 4,8, % 74,74,000.0% 7,5,000.0%,05,000 50,000 4 / 6 Birmingham, AL 5,08,000.90% 7,87, %,955, % -0,000 50,000 / 5 Boise, ID 6,707, % 7,546,978 5.% 4,54,70.74% / 6 Boston, MA 57,000, % 45,000, % 0,000,000.% 0 0 / 4 Broward-Palm Beach, FL 8,50,000.50% 55,00, % 7,450, %,0 68,797 / Charleston, SC,500, %,4,99.7% 6,85,46 0.5% 75,000 65,000 N/A / Charlotte, NC 4,84,085.70% 7,879,44 0.0%,7, % 0 594,660 / 4 Chicago, IL 84,570, % 4,9, % 8,764,575.0%,4,070 9,896 5 / 0 Cincinnati, OH 0,900, %,600, %,500, % 50,000 45,000 4 / 5 Cleveland, OH,00, % 4,000,000.70% 5,00,000.0% 60,000 50,000 / 4 Columbia, SC,075, % 6,00, % 7,75, % / Columbus, OH 7,90,000.00% 7,800, % 45,70, % 60,000 00,000 / Dallas, TX 87,008,05 4.0% 5,699,4 5.0% 0,707, % 57,000 96,967 6 / 6 Dayton, OH,500,000.00% 7,00,000.50% 0,700,000.56% 80, ,000 4 / 4 Denver, CO 5,07,847.90% 69,65,6 4.0% 04,48,6.6%,000,000,00,000 / Detroit, MI 9,500, % -,650,000,00,000 + / + Fort Worth, TX 9,50, % 7,0, % 46,54,740.45% 7,750 4, / Greensboro, NC 847,99 6.5% 7,6, % 8,64,5 8.55% -5,50 95,000 5 / N/A Greenville, SC 4,45, % 7,575, %,00, % 5,000 50,000 / Hartford, CT 4,75, %,55, % 7,800, % / 4 Houston, TX 77,50, % 00,550, % 78,070,000.40% 800,000 50,000 / 5 Indianapolis, IN 0,5, % 8,45,000.0% 8,705, % 8,000 85,000 4 / Jackson, MS 4,000, % 9,000, %,000, % 0 0 / Jacksonville, FL 9,00, % 4,000,000.90%,00,000.7% 45, ,000 / 5 Kansas City, MO/KS,6, %,664, % 4,800, % 50,000 60,000 / Las Vegas, NV 8,686,67 9.0%,060,0 6.56% 9,746,78 7.4% -954,749 00,000 8 / + Long Island, NY,000, % 9,000, % 5,000, % 500, ,000 4 / 5 Los Angeles, CA 4,56, %,060, % 6,6, % -00, ,000 4 / 4 Louisville, KY 5,8,07 4.9% 99, % 6,0,4 4.84% 50,000 00,000 / Memphis, TN 9,40,94 8.0%,80,97 5.0%,04,860.6% 75,000 75,000 / 5 Miami, FL 4,650, % 56,50,000.00% 80,900,000.07% 5, ,0 / Minneapolis, MN 5,0, % 5,0, % 50,04, % 70,000 50,000 / Naples, FL,5, % 4,65,797.50% 7,678,75.4% 75,500 75,00 / Nashville, TN 0,000, %,50,000.00%,50, % 55, ,000 / New Jersey, Coastal 5,60, %,440, % 6,800, % 85,000 45,000 4 / 4 New Jersey, Northern 87,000, % 58,000, % 45,000, %,000,000 4,000,000 5 / 5 New York, NY 9,000, % 6,000,000.00% 5,000, % -00,000,00,000 4 / 5 Oakland, CA 8,9, % 77,05,54.00% 95,9, % 494,04 66,944 / Orange County, CA 44,,84 4.0% 85,64,97.50% 9,76,68.4% 644,04 54,4 5 / Orlando, FL,858, % 4,6, % 6,074, % -,000 58,700 4 / 9 Philadelphia, PA 59,400,000.0% 86,900,000.80% 46,00,000.% 0 0 / Phoenix, AZ,09, % 85,45, % 6,76,50 9.%,60,000,750,000 / Pittsburgh, PA 9,64, % 6,40,9 7.80% 6,06,49 7.9% -0,000 40,000 N/A / 5 Portland, OR 5,4, %,869,98 8.0% 8,0,54 9.% 540,55 550,000 4 / 5 Providence, RI,65, %,985, % 6,60,000 6.% 60,000 70,000 / Raleigh, NC 8,75, % 7,5,9 5.95% 5,69,08 5.5% 0 65, / 5 Richmond, VA,800, % 0,900, % 4,700, % 00,000 00,000 / Sacramento, CA 7,0,5 4.70% 6,86,0 6.0% 79,08, % 79,9 469,0 5 / 5 Salt Lake City, UT 7,0,95.00% 4,457, %,578,59.8% 500, ,000 / San Antonio, TX 9,905,000.0% 4,0, %,96, % -6,084 0,667 / San Diego, CA 6,066,7 0.0% 50,600,76.50% 76,667,078.4%,475,000,50,000 / San Francisco, CA,05,64.0% 7,499,64 8.0% 04,54, %,084,58 90,46 / San Jose, CA 7,494,4.7% 75,65, % 9,47, %,974,,8,0 / Sarasota, FL,90, %,98,585.70% 5,9,05.54% 4,000 90,000 / Seattle, WA,559,74 9.6% 66,609,94.0% 89,68, % 5,000 50,000 / St. Louis, MO 6,00, % 7,600, %,800,000.6% 0 700,000 / 5 Syracuse, NY,7, % 6,9, % 9,050, % -45,000 0 / Tampa, FL 0,74,000.0% 0,5,000.0% 40,695,000.6% -54,000 5,000 / Tulsa, OK,9, % 8,44,407.76%,66, % 5,000 00,000 / + Washington, DC 4,76, % 6,79, % 80,500, %,055,000 4,58, 5 / 5 Wilmington, DE 7,00, %,700,000.50% 8,800, % -95,000 40,000 5 / 8 Totals/Simple Average,674,995,04.9%,98,488, %,94,98, % 00, ,50.08 / Market Conditions and Forecasts: Suburban Market Area (Table 4) Weighted Average 5.65% 4.7% 4.99% 0 Integra Realty Resources, Inc.