Docstoc

2012 Real Estate Forecast Metropolitan Phoenix Arizona

Document Sample
2012 Real Estate Forecast Metropolitan Phoenix Arizona Powered By Docstoc
					2012 Real Estate Forecast
Metropolitan Phoenix                     •   Arizona




                     2375 East Camelback Road, Suite 300 | 602.954.9000 | www.cassidyturley.com
Capital Markets | Corporate Services | Project & Development Services | Project Leasing | Property Management | Tenant Representation
Letter from the President &
Managing Partner
                           Dear Valued Clients and Colleagues,

                           On behalf of all our real estate professionals, I would like to thank you, our Clients and Colleagues,
                           for your support and trust. Our relationship with you is the thing we value most and will never take for
                           granted. For 2012 our promise is to help you meet your real estate goals now and in the future, taking
                           advantage of every available opportunity. As a firm we are about to start our 40th year in business in
                           Phoenix with what I believe is the best team in the industry.

                           While we continued to face economic challenges in 2011, there is no doubt that we saw growth and
                           stability in nearly every sector of the Arizona commercial real estate market. Multi-Family, Industrial and
Capital Markets led the way with strong sale and absorption numbers. We believe that while the growth in Office, Retail and Land
has been slower to return, there are definite signs of life in the market. As we look ahead to 2012 we anticipate continued
improvement and hope that the year-end news of four straight months of job growth and improvement in the residential housing
market are all signs that we are moving forward in our recovery.

We are beginning the New Year in our elegant, remodeled office space. We survived the purging, packing and construction and the
end result is we have a first class space that reflects the caliber of people inside of it. You are invited to come by anytime and see
the new office. 2012 will bring one more transformation as we complete our rebranding efforts by dropping the BRE Commercial
portion of our name. Along with our Western counterparts in Southern California, Northern California and Denver, we will be known
as Cassidy Turley, leveraging the outstanding reputation and expertise of the company we are so proud to be a part of.

During challenging economic times we all look for insight and answers. Our promise to you is that we will continue to enhance the
resources and services we provide to you. We are pleased to present you with the 2012 Real Estate Forecast and as you review the
enclosed information, we hope you will continue to think of Cassidy Turley to fulfill all of your commercial real estate service needs.

Sincerely,




Bryon R. Carney
President & Managing Partner
Cassidy Turley Arizona




                                                                                                                      2 | cassidyturley.com
Table of Contents

U.S. Macro Forecast .......................... 4

Capital Markets Report ....................... 8

Industrial Report ............................... 9

Land Report ...................................... 10

Multi-Family Report ........................... 11

Office Report ..................................... 12

Retail Report ..................................... 13

Company Overview & Key Facts ........... 14

Sources & Contributors....................... 15




                                                         3 | cassidyturley.com
                                               U.S. Macro Forecast Forecast
                                                        U.S. Macro
                                                                                                                November 2011
                                               November 2011


Slow and Bumpy, and Occasionally Scary
Kevin J. Thorpe, Chief Economist

Click to view U.S. Macro Forecast

The U.S. has avoided another recession, but economic conditions couldn’t feel more uncomfortable – at the moment. The third
quarter GDP numbers were actually quite solid. Real GDP grew at an annualized rate of 2.5%, more than double the average growth
rate registered in the first half of 2011. Best of all, demand from both consumers and businesses picked up in Q3. A measure called
real final sales – which is GDP minus the change in inventories – grew at a 3.6% rate. That is triple the rate of growth compared to
the first two quarters of the year. Although regional details have not yet been released, recent employment data give us a sense of
which markets are driving growth. The top ten markets in terms of job creation in the third quarter include: Houston, TX, New York, NY,
Warren, MI, Washington DC, Tampa, FL, San Jose, CA, Phoenix, AZ, San Francisco, CA, Riverside, CA, and Oakland, CA.


           Still Deleveraging                                                Suppressing Economic Growth
           Household Debt-to-GDP                                             Real GDP, % chg
             100%                                                               5%
                                                                                                                        Well below
                                                                                4%                                      potential GDP
              80%
                                                                                3%
              60%      Historical Average
                                                                                2%

              40%                                                               1%
                                                                                0%
              20%
                                                                               -1% 2000 2002           2004 2006 2008   2010 2012
                0%                                                             -2%
                                                                               -3%
            19 2

            19 1

            19 4

            19 3

            19 2

            19 1

            19 4

            19 3

            19 2

            20 1

            20 4

            20 3

                  2
                 Q

                 Q

                 Q

                 Q

                 Q

                 Q

                 Q

                 Q

                 Q

                 Q

                 Q

                 Q

                 Q
              54

              59

              63

              68

              73

              78

              82

              87

              92

              97

              01

              06

              11




                                                                               -4%
            19




           Source: Federal Reserve                                           Source: BEA, Cassidy Turley



Although the odds of a near-term recession have been greatly reduced, the economic challenges are far from over. In mapping out the
trajectory over the next few years, it is worth remembering that this remains a deleveraging recovery. That means the debt-overhang
– caused by the 10-15 year credit-asset bubble – will continue to weigh down consumption for many years. According to the Federal
Reserve, household debt to GDP was 89% in the second quarter of 2011. While that is better than the 100% in 2009, it is at least 20%
above where it needs to be before we can expect steady-strong consumer spending patterns to replace erratic-weak ones. Moreover,
under current law and spending policies, the Federal government will soon become a significant drag on the U.S. economy. Depending
on what lawmakers agree to between now and the end of 2011, the impact of Federal fiscal policy will likely be a cut in real GDP growth
of nearly 1% in 2012. Thus, even if the U.S. economic recovery were to follow a healthy script from this point forward, economic
growth will still remain largely suppressed. Real GDP will grow at an average rate of 2% in 2012, with greater odds that the growth rate
will be closer to 1% than it is to 3%.

Dark Cloud - European Debt Crisis
Since the debt-overhang minimizes growth prospects, the U.S. economy remains extremely vulnerable to external shocks. The
European sovereign debt crisis remains the biggest threat. The debt problems in Europe have been well documented, but the fear
is that this crisis could reverberate back to the U.S in a number of ways. First, the U.S. does a fair amount of trade with Europe: $20
billion in goods are traded each month with France and Germany alone. If those nations’ economies sink further, U.S. imports and
exports will be impacted. Second, U.S. banks have around $100 billion (0.7% of GDP) in direct exposure to foreign debt (and an
unquantifiable amount of indirect exposure) – so if the whole financial system in Europe were to collapse, U.S. banks would take a
sizable hit. Third, and probably most important, consumer confidence continues to be negatively impacted by the situation in Europe.
The latest reading of the Consumer Confidence Index from The Conference Board was 39.8 – consistent with recessionary levels.

                                                                                                                                   cassidyturley.com
                                                                                                                               4 |cassidyturley.com | 1
                                                                                             U.S. Macro Forecast Forecast
                                                                                                      U.S. Macro
                                                                                             November 2011
                                                                                                                                                                                 November 2011



           Dark Cloud: Europe                                                                                               Making U.S. Nervous
           10-Yr Sovereign Debt Yields
                                                                                                                             150
            24
                                                                                                                             125
            20
                                                                                                                             100
            16                                                                                                                                                                                     October reading
                                                                                                                              75
            12
                                                                                                                              50
             8                                                                                                                                                       Low point during                39.8
                                                                                                                              25                                     recession
             4                                                                                                                                                                          25.3
                                                                                                                               0
             0




                                                                                                                            Fe -00



                                                                                                                            Fe -02



                                                                                                                            Fe -04



                                                                                                                            Fe 06



                                                                                                                            Fe -08



                                                                                                                            Fe -10
                                                                                                                            Oc -01



                                                                                                                            Oc -03



                                                                                                                            Oc -05



                                                                                                                            Oc -07



                                                                                                                            Oc -09



                                                                                                                            Oc -11
                                                                                                                            Ju -01



                                                                                                                            Ju -03



                                                                                                                            Ju -05



                                                                                                                            Ju -07



                                                                                                                            Ju -09



                                                                                                                                  1
               Jan-          May- Sep-       Jan-     Jun-       Oct-     Mar-     Jul-   Nov-    Mar-   Sep-




                                                                                                                               t-1
                                                                                                                              n-
                                                                                                                              n



                                                                                                                              n



                                                                                                                              n




                                                                                                                              n



                                                                                                                              n
                                                                                                                              b



                                                                                                                              b



                                                                                                                              b



                                                                                                                              b



                                                                                                                              b



                                                                                                                              b
                                                                                                                               t



                                                                                                                               t



                                                                                                                               t



                                                                                                                               t



                                                                                                                               t
                00            08   08         09       09        09       10       10     10      11      11




                                                                                                                            Ju
                 Germany           Portugal         Italy        Ireland         Greece      Spain       U.K
                                                                                                                                                         Consumer Confidence Index
           Source: Moody’s                                                                                                  Source: The Conference Board


At the G-20 summit in Cannes in late-October, euro-zone leaders announced a plan to address the ongoing debt crisis. The main
elements of the plan include a substantial restructuring of Greek debt (where Greek private sector bond holders take a 50% haircut), a
bigger bailout fund, and recapitalizing European banks. But the situation is hardly resolved and government policy remains virtually a
wild card at this stage. As of now, our assumption is that a “comprehensive plan” will eventually be worked out in Europe and a severe
downturn will be avoided. But this assumption may amount to a “leap of faith” and any sudden change could dramatically alter the
economic outlook.

Commercial Real Estate Outlook
Commercial real estate has already demonstrated for a solid 18 months that it can perform reasonably well in the throes of a
deleveraging recovery. In fact, since April of 2010, the U.S. office sector has absorbed 61.6 million square feet (msf), the industrial
sector has absorbed 91.5 msf, and the apartment sector has absorbed 324,000 units. For the office and industrial sectors, the current
pace of demand is not far off from pre-recession (2005 and 2006) levels, and the apartment sector is registering the strongest levels
of demand since the technology boom of the later 1990s. Retail is the one commercial sector that continues to lag behind. Demand
for retail space did turn positive in the first quarter of 2011 (+704,000 msf), but rising gas prices in the early summer took its toll on
consumer spending. The retail sector shed more space than it absorbed in Q2 and Q3 of this year. With retail sales having shown
flashes of an uptrend in August and September, it is reasonable to expect that the retail sector will begin absorbing space again in early
2012.
                 Demand Since 2010 Q2                                                                                        Demand Forecast - 2012
                 Net Absorption                                                                                              Net Absorption
                                                                                                                                          80                                                   150,000
                             100                                                                  400,000
                                                                                                                                                                                               125,000
                             80                                                                                                           60
                                                                                                  300,000
                                                                                                                                                                                               100,000
                                                                                                               # of Units




                             60
                                                                                                                                                                                                         # of Units
                  Mill. SF




                                                                                                                               Mill. SF




                                                                                                  200,000                                 40                                                   75,000
                             40
                                                                                                                                                                                               50,000
                                                                                                  100,000                                 20
                             20
                                                                                                                                                                                               25,000

                              0                                                                   0
                                                                                                                                           0                                                   0
                                    Office          Industrial          Retail     Multifamily                                                 Office   Industrial   Retail   Multifamily
                                                                                   (right axis)
                                                                                                                                                                                (right axis)
                 Source: Cassidy Turley                                                                                      Source: Cassidy Turley


Investment sales remain healthy, but the pace of activity has slowed recently. Sales volume for all product type fell from $58.5 billion
in the second quarter of 2011 to $49.8 billion in the third quarter, a drop of 15%. The decline was broad-based: office sales off 5%,
industrial down 6%, retail sales down 47%, apartment units down 4%. The markets reporting the biggest drop in sales in Q3 include
Washington DC and San Francisco. Because these two markets were among the leaders prior to this point, a natural slowdown from
very strong levels was expected. Manhattan, Boston, Houston, Las Vegas, Philadelphia all recorded huge increases in sales volume in
Q3.
                                                                                                                                                                                                          cassidyturley.com
                                                                                                                                                                                                     5 | cassidyturley.com | 2
                                                                U.S. Macro Forecast Forecast
                                                                         U.S. Macro
                                                                November 2011
                                                                                                                                                                                                      November 2011



Nevertheless, it is clear that investment sales have lost momentum, but it is certainly explainable. Given the numerous shocks that
occurred in the first half of 2011 – the debt ceiling debate, the S&P downgrade of U.S. credit, the European crisis worsening, plunging
consumer confidence – it is no surprise that investor demand eased in Q3. Given the global uncertainty, lenders pulled back. In
August, CMBS issuance dropped 50%, and AAA spreads over swaps jumped from 170 bps in May to 330 bps in October.

            Investment Sales Slow in Q3                                           Low Interest Rates for a Long Time

                         $70                                                       4.0%
                                                                                                                                                                                 QE2
                         $60                                                       3.5%                                                                                          ends
                                                                                                                                                                                                           S&P
                                                                                   3.0%                                                                                                                  Downgrade
                         $50                                                                                                                                                                                                                  Operation
                                                                                   2.5%                                                                                                                                                         Twist
              Billions




                         $40                                                       2.0%                                                                                                                            Fed
                         $30                                                       1.5%                                                                                                                        announces
                                                                                                                                                                                                                low rates
                         $20                                                       1.0%                                                                                                                        thru 2013
                                                                                   0.5%
                         $10
                                                                                   0.0%
                          $0




                                                                                          3/1/11
                                                                                                   3/14/11
                                                                                                             3/27/11
                                                                                                                       4/9/11
                                                                                                                                4/22/11
                                                                                                                                          5/5/11
                                                                                                                                                   5/18/11
                                                                                                                                                             5/31/11
                                                                                                                                                                       6/13/11
                                                                                                                                                                                  6/26/11
                                                                                                                                                                                            7/9/11
                                                                                                                                                                                                     7/22/11
                                                                                                                                                                                                               8/4/11
                                                                                                                                                                                                                        8/17/11
                                                                                                                                                                                                                                  8/30/11
                                                                                                                                                                                                                                            9/12/11
                                                                                                                                                                                                                                                      9/25/11
                                                                                                                                                                                                                                                                10/8/11
                                                                                                                                                                                                                                                                          10/21/11
                           Q1

                                  Q2


                                         20 3
                                              Q4

                                              Q1

                                              Q2

                                              Q3


                                         20 4
                                              Q1

                                              Q2

                                              Q3
                                              Q




                                              Q
                           09

                                  09

                                         09

                                           09

                                           10

                                           10

                                           10

                                           10

                                           11

                                           11

                                           11
                         20

                                20

                                       20




                                         20

                                         20

                                         20

                                         20




                                         20

                                         20




                                              Closed $ Volume                                                                                                          10-Year Treas.

            Source: Real Capital Analytics                                        Source: Moody’s




Assuming no additional shocks to the economy at this point, the CMBS market will reactivate in larger volume numbers, and spreads
will begin to tighten in 2011Q4. CMBS issuance will reach $30 billion in 2011, and will near $40 billion in 2012, fueled in part by
refinancing needs. That level of CMBS lending in 2012 is consistent with 2004 levels of investment sales. Moreover, assuming the
recovery follows the recovery script as we have laid out, investor demand will continue to spread beyond the primary trophy markets
– D.C., New York and San Francisco. This trend has already begun. Sales volumes in Atlanta, San Diego, Pittsburgh, Philadelphia,
Las Vegas and Phoenix were at least 30% higher in the third quarter than a year ago, and in some of these markets sales growth
was in triple digits. Assuming the recovery continues on the recent trajectory of the last few weeks, secondary and tertiary markets
will see much stronger sales activity in 2012. If the U.S. economic recovery falters, then we will see a flight back to safety, which
disproportionately benefits New York, Boston, San Francisco and DC.

Interest rates will remain low into the foreseeable future. In September, the U.S. sold $21 billion of 10 year bonds at an average
interest rate of 2.12%. This suggests that despite the increased risks associated with U.S. debt, there has been no drop in demand
for Treasuries whatsoever. Thus, investor demand for U.S. bonds – fueled by a flight to safety in a rocky recovery – will continue to
keep rates down. Moreover, on August 9th, the Federal Reserve announced it will keep interest rates exceptionally low at least through
mid-2013, and on September 21st it announced Operation Twist (selling $400 billion in short-term Treasuries in exchange for the
same amount of longer-term bonds). This, in combination with a strong possibility of another round of quantitative easing (QE3) in the
beginning of 2012 further argues that 10-year Treasury yields will remain below 3% though 2012. The odds of another round of QE3
will rise above 50% if there is any sign of disinflation or deflationary pressures in the near term.

Double-Dip discussion not over yet
Although the most probable scenario is that U.S. economy will continue to expand, we have not heard the last of the double-dip
rhetoric. The slow growth scenario means that the consumer is continuously holding their finger over the panic button. If anything
strays from the script, then confidence plunges, spending slows, businesses slow or stop hiring, and the economic landscape turns
very scary, very quickly. Despite the heightened anxiety, the property markets will generally continue on a slow recovery track in 2012.
Demand for office and industrial space next year will resemble 2011 levels, the apartment sector will continue to shine, and the retail
sector will see its first year of positive absorption since 2007.

If it continues to be a slow and bumpy recovery, we’ll take it – we are expecting it. Let’s just try to avoid scary for a little while…



                                                                                                                                                                                                                                                             cassidyturley.com
                                                                                                                                                                                                                                                        6 | cassidyturley.com | 3
                                                                   U.S. Macro Forecast Forecast
                                                                            U.S. Macro
                                                                   November 2011
                                                                                                                                                     November 2011



Baseline Scenario:

                                            2010                                     2011                                      2012                                 Annual
                                              Q4            Q1               Q2             Q3             Q4            Q1           Q2             2010            2011            2012
 US Economy
 Real GDP (a)                                 2.4           0.4              1.3            2.5            2.2           1.4          2.0             3.0              1.6             2.0
 Nonfarm Employment (b)                      245           422              467             230            250           343          360            940*            1,323           1,420
 Office-using Employment (b)                  122           148              143              57             93           120          126            307*             441             497
 Unemployment Rate                            9.6           8.9              9.1            9.1            9.1           9.1          9.0             9.6              9.1             9.0
 Retail Sales                                12.4          10.5              4.7            4.5            8.0           4.0          5.5             6.4              6.9             7.0
 CPI Inflation (a)                             1.2           2.2              3.3            3.8            2.5           2.0          2.1             1.7              3.0             2.2
 CCI                                          57            67               62              50             42           46           54               54              55              54
 Fed Funds Rate                               0.2           0.2              0.1            0.1            0.1           0.1          0.1             0.2              0.1             0.1
 10-year Gov't Bond                           2.9           3.5              3.2            2.4            2.3           2.5          2.7             3.2              2.8             2.9
 ISM Manufacturing Index                     57.9          61.1             56.4            51.0          53.0          55.5          54.0            57.3            55.4            55.0
 West Texas Intermediate                      85            94              103              90             91           92           94               79              94              98
 Office Sector
 Net Absorption (c)                           9.3          10.4             12.2            15.0          14.1          14.9          15.6            19.7            51.7            56.5
 Vacancy                                   16.8%         16.6%            16.4%         16.2%            16.0%         15.9%       15.7%            16.9%           16.3%            15.6%
 New Deliveries (c)                           4.7           6.2              4.9            4.7             --            --           --             33.6            20.9            25.5
 Asking Rents                              $21.30        $21.35           $21.35        $21.39           $21.40        $21.45      $21.50           $21.34          $21.37          $21.53
 Investment Sales (d)                       $19.5         $10.1            $15.0        $14.3             $15.1        $12.0       $15.8             $43.3           $54.5           $61.0
 Industrial Sector
 Net Absorption (c)                          10.4          24.7             22.4            24.7          18.0          15.5          17.4           (8.7)            89.8            69.6
 Vacancy                                    9.7%          9.5%             9.3%             9.2%          9.1%          9.0%          8.8%           9.8%            9.3%            8.8%
 New Deliveries (c)                           1.3           6.0              4.9            9.5             --            --           --             15.0            27.2            26.9
 Asking Rents                               $5.07         $5.05            $5.09        $5.13             $5.14        $5.16       $5.18             $5.13           $5.10           $5.20
 Investment Sales (d)                        $8.5          $4.2             $7.0            $6.6          $9.0          $6.5          $7.2           $16.6           $26.8           $28.2
 Retail Sector**
 Net Absorption (c)                           0.4           0.7             (0.4)           (0.0)         (0.4)          0.9          2.1            (3.2)            (0.2)            8.2
 Vacancy                                   11.0%         10.9%            11.0%         11.0%            11.1%         11.2%       11.3%            11.0%           11.0%            10.9%
 New Deliveries (c)                           0.8           0.2              1.0            0.8             --            --           --             4.5              4.2            12.7
 Asking Rents                              $18.99        $18.97           $18.97        $18.97           $18.95        $18.95      $18.96           $18.99          $18.97          $18.99
 Investment Sales (d)                        $8.6          $6.2            $15.7            $8.2          $11.1         $6.3          $9.0           $19.7           $41.2           $30.2
 Apartment Sector**
 Net Absorption (e)                          58.3          44.8             42.1            35.8          44.8          32.0          30.0           228.0           167.5           120.0
 Vacancy                                    6.6%          6.2%             5.9%             5.6%          5.3%          5.1%          5.0%           6.6%            5.8%            4.9%
 New Deliveries (e)                          14.1           7.5             10.5            8.2             --            --           --             97.7            38.0            88.8
 Asking Rents                              $1,043        $1,047           $1,053        $1,059           $1,065        $1,069      $1,072           $1,043          $1,056          $1,110
 Investment Sales (d)                       $13.3          $9.1            $13.8        $13.3             $13.0        $12.0          $9.4           $32.4           $49.2           $48.5
(a) - Annualized Growth Rate, Quarter-over-Quarter   (c) - Millions square feet                     (e) -Thousands                          **Reis & RCA Historical data; Cassidy Turley Forecasts
(b) - Thousands, SA, Quarterly Chg.                  (d) - Quarterly Sum, Billions                  *December 2010 over Dec 2009




                                                                                                                                                                           cassidyturley.com
                                                                                                                                                                      7 | cassidyturley.com | 4
                                                              Capital Markets Forecast
                                                              Metropolitan Phoenix • Arizona • 2012


        Investment transactions in the                        Key Capital Markets Transactions 2011
        coastal gateway markets were robust
                                                               Buyer                        Seller            Type         Property Name              Size (SF) Sale Price (Millions)
        in 2011. These markets, such as                        Cole Real Estate             Apollo Group, Inc Office       University of              599,664         $170.0
        Washington D.C., New York, Boston                      Investments                                                 Phoenix
                                                               KBS Realty Advisors       Metro                Office       Fountainhead               439,070            $137.0
        and Los Angeles, have experienced
                                                                                         Commercial                        Office Plaza
        strong demand to purchase a limited                                   Sales by Property Type
                                                                                         Properties
        number of core assets, with cap rates                  Morgan Stanley & Co.      McCarthy Cook        Office       Viad Tower                 482,108            $56.0
                                                               Inc.
        on many properties as low as 5 to 6                       Apartment
                                                               Karlin Real Estate        Herberger
                                                                                              34%
                                                                                                              Retail       Shea Scottsdale            277,253            $50.3
        percent. Investors are expected to shift                  Industrial      38%
                                                                                         Enterprises, Inc                  Shopping Center
        their strategies in 2012 in search of                     Office
                                                               Crexus Investment Corp. Alliance Beverage      Industrial   Papago West                629,764            $33.25
                                                                  Retail                 Distributing
                                                                                      13% 15%
        higher yields with a strong interest in
        Metropolitan Phoenix.
                                                                                                                           year-over-year with continued distressed
                                                              Average Capitalization Rates
        Sales by Property Type Property Type
                      Sales by                                (Closed Sales)
                                                                         Average Capitalization Rates
                                                                                                                           sales as well as institutional purchases
        2011                                                                                                               of class A properties leased to credit
                                                               10.0%
                                                                                                                           tenants.
                                                                8.0%
           Apartment                                                                                                       Demand for Metropolitan Phoenix
                           38%           34%                                                                               investment property is expected to
           Industrial
                                                                6.0%
           Office                                                                                                          remain strong in 2012, but will consist
                                                                                                                           primarily of smaller transactions below
           Retail                13% 15%                        4.0%
                                                                       Apartment Industrial      Office     Retail         10 million dollars. Although financial
                                                                                     2010     2011                         markets remain turbulent and the
                                                                                                                           economic recovery choppy, real estate
        All property types experienced an                                                                                  as an investment class is considered to
        increase in sales volume year-over-year,      Because of the strong leasing in large                               be an excellent alternative.
                      Average Capitalization Rates
        causing investment sales to increase
                                                             Property Sales
                                                      state-of-the-art and Volume
                                                              ($1 Million
                                                                          warehouse/distribution
                                                                            above)
        10.0%                                                                                                              Property Sales Volume
        nearly 73 percent in 2011. As lenders         buildings in 2011, investment sale
                                                    $12,000                                                                ($1 Million and above)
                                                                                                                                                Property Sales Volume
        continue to sell their distressed assets      transactions increased sharply in the
                                                    $10,000                                                                                     ($1 Million and above)
                                                   Millions




        and owners recycle capital, investment        second half in the second half of the
                                                     $8,000                                                                           $12,000
         8.0%                                        $6,000
        sales volume is expected to increase,         year and are expected to remain strong                                          $10,000
                                                                                                                           Millions




                                                     $4,000                                                                            $8,000
        albeit slightly, in 2012. In 2011,            in 2012. The bulk of the industrial
                                                     $2,000                                                                            $6,000
        several owners took advantage of a
         6.0%                                         investment transactions occurred in the
                                                         $0                                                                            $4,000
                                                             03 04 05 06 07 08 09 10                                                   $2,000
        large pool of investors by selling trophy     Southwest Valley, where most of the
                                                                                                                                          $0
        assets, with several large transactions       leasing activity occurred in 2011. In                                                     04   05   06   07   08   09   10   11

        greater than 20 million dollars.
         4.0%                                         some cases, sale prices have reached or
                 Apartment million dollars
        Transactions over 20Industrial       Office   Retail
                                                      exceeded replacement cost, signaling
                                                                                                                           As demand for investment real estate
        nearly doubled in 2011. In 2012,
                                2010 2011             a bullish outlook by investors. Retail
                                                                                                                           in Arizona increases, 2012 will be the
        REIT’s and institutional owners will          investment properties saw the largest
                                                                                                                           year to purchase these assets. 2012
        continue to seek stabilized, triple net       increase of all property types in 2011
                                                                                                                           will be a great year to bring a stabilized
        leased, class A properties, while private     with more than double the transaction
                                                                                                                           asset or well located property to market
        investors will focus on lender sales of       volume from the previous year. Office
                                                                                                                           as buyer interest is strong.
                  value-added properties.
        smaller, Property Sales Volume                investment transactions also increased
                  ($1 Million and above)
                                                                                                                                                                8 | cassidyturley.com
     $12,000
     $10,000
ns
                                                                         Industrial Forecast
                                                                         Metropolitan Phoenix • Arizona • 2012


            In 2011, the Metropolitan Phoenix                       Key Industrial Transactions 2011
            industrial market experienced strong net
                                                                    Lessee/Buyer          Lessor/Seller         Property                                    Submarket           Size (SF)
            absorption, outperforming most of the                   Amazon.com, Inc.      Buzz Oates            Fowler Distribution Center Bldg 2           Southwest           1,267,110
            country. In fact, it has outperformed the                                     Enterprises                                                       Phoenix
            national average and ranks second out                   Dick's Sporting Goods Sunbelt Holdings      Dick's Sporting Goods Distribution Glendale                     600,000
                                                                                                   Industrial Graphs
            of the top 67 markets covered in the
                                                                    Amazon                Duke Realty           Buckeye Logistics Center - Phase I Southwest                    400,000
            United States in terms of positive net                                        Corporation                                                       Phoenix
                                       Vacancy Rate                 Home Depot USA, Inc JD Partsmaster, LLC 7200 W Buckeye Rd                               Southwest           400,000
                                            quarter 2011. Total %
            absorption as of the third Nine Quarters
                                       Last
                                                                                                                                                            Phoenix
                                                                                                                                                         Vacancy Rate
            Nationally, the U.S. industrial sector
                                       '01                       9.60%                                                                18%
                                                                    Cornerstone Services, Utah State            Interstate Logistics Center, Bldg. 1        Southwest           337,897
                              Industrial Graphs
                                       '02
            has been on a hot streak. The ISM
                                                               11.00%
                                       '03                          Inc
                                                               11.00%                     Retirement                                  15%                   Phoenix
                                        or
            index has been at 50 '04 above since               10.90%                                                                 12%
                                       '05                       7.70%
            September 2009. A reading of 50 or                      2012 but remain sluggish compared to                               9%
                                                                                                                                 the reemergence of speculative
                                       '06                       6.50%
            above indicates that the manufacturing
                                       '07                       8.40% balance of the market. Some second
                                                                    the                                                                6%
                                                                                                                                 construction.
                                       '08                     13.00%                Vacancy Rate
            sector is in expansion mode, a leading                  generation space with obsolete features
                                                                  18%
                                                                                                                                       3%
                                                                                                                                            '04        '06        '08       10         12F
                                       09                      15.20%                                                            Due to the financial crisis and elevated
            indicator for industrial space demand.
                                       10                           could experience rental rate declines as
                                                               14.20%
                                                                  15%                                                Millions
                                       11                        12.1%                                                           construction costs speculative
                                       12F                          small businesses continue to struggle
                                                                 12.0%
                                                                  12%                                                            construction has been absent from
            Vacancy Rate                                            with financing their operations and
                                                                   9%                                                            the market in recent years. In many
            Year-End                                                lethargic business demand. Tenants
                                       Completions vs. Absorption
                             Vacancy Rate                          6%                                                            cases, these new speculative projects
             18%                                                    and owner/users
                                       Last Nine Quarters Completions Net Absorption in the market should                                          Completions vs. Net Absorption
                                       '01                      7660.0
                                                                   3%            -1419.7                                         could be significantly preleased when
             15%                                                                    by
                                                                    take action '06 locking in discounted 12F
                                                                5269.0'04                    '08         10                             16
                                       '02                                        1369.0                                         completed. Build-to-suit and owner-
             12%                       '03        Millions          rental rates for the long term and sale
                                                                2675.0            2000.5                                                12
                                       '04                      3272.0            4019.4                                         built construction activity increased
              9%                                                    prices for buildings, as these rates may                             8
                                       '05                      3345.0            7883.7                                         sharply in 2011 and is expected to
              6%                       '06                          never dip to these levels again.
                                                                5234.0            6350.4                                                 4
                                       '07                      9262.0            4046.7
                                                                                                                                 remain strong in 2012. Investors and
                                                                                                                                         0
              3%                       '08                     11,575          (2,189.0)                                         developers are once again actively
                  '04      '06        '08       10       12F                                                                            -4
                                       09                     3,385.0          (2,777.0)
 llions                                10                     1,342.0 Completion vs. Net Absorption
                                                                                   3,500
                                                                                                                                               '04      '06      '08
                                                                                                                                 searching for affordable, entitled,12F    10

et Absorption                          11P                       1,082       Completions SF)
                                                                      Year-End (In Millions of vs. Net Absorption
                                                                                   6,000                                                            Completions       Net Absorption
                                                                                                                                 shovel-ready land in time for the next
        -1419.7                        12F                       2,410             5,000
                                                                    16                                                           development cycle.
         1369.0
            Market fundamentals have been
         2000.5                                                     12
                                       Asking three years
            gradually improving the pastRental Rates
         4019.4                                          General Industr
                                                                     8      R&D/flex     Warehouse/Dist.                           Asking Rental Rates
            as vacancy rates peaked in mid-2009
         7883.7         Completions vs. Net Absorption
                                       '01                        $6.72           $10.32                      $4.20                Year-End ($SF/Yr./Triple Net) Rates
                                                                                                                                                         Asking Rental
         6350.415.2 percent. Net '02
            at 16                      absorption levels             4
                                                                  $6.36           $10.44                      $4.08
                                                                                                                                   $15.00
         4046.7 climbed back to'03
            have                        pre-recession
                                                                  $6.72
                                                                     0
                                                                                  $10.56                      $4.44
               12                      '04                        $6.36           $11.52                      $4.08
      (2,189.0)
                                       '05                        $6.60           $11.76                      $5.16
            levels
      (2,777.0)8 and are expected to surpass
                                       '06
                                                                    -4
                                                                  $7.32 '04         '06
                                                                                  $12.24    '08         10       12F
                                                                                                              $6.00
                                                                                                                                   $11.00

                                        as
            6 million square feet '07 the vacancy
         3,500 4                                                  $7.36           $13.42                      $6.10
         6,000 0 is expected to decline by year-
            rate                       '08                        $7.56         Completions
                                                                                  $12.72         Net Absorption
                                                                                                              $5.64                  $7.00
                                       09
         5,000 2012. Due to increased demand,                     $6.76           $12.31                      $4.72
            end-4                      10                         $6.48           $11.40                      $4.32                  $3.00
                    '04     '06      '08       10      12F
            weighted average asking rental rates
                                       11P                        $6.48           $11.40                      $4.32                        '04         '06        '08        10        12F
                                       12F                        $6.80           $11.97                      $4.54                           General Industrial          R&D/flex
                         Completions
            are expected to rise this Net Absorption a
                                           year, albeit             Because of the lack of large available                                    Warehouse/Dist.
  R&D/flex  modest 2.5 to 5 percent marketwide.
                  Warehouse/Dist.                                   industrial properties, construction
         $10.32 tenant space demand, under
            Small                          $4.20                                     Asking Rental Rates
                                                                    activity is expected to increase
         $10.44                            $4.08
            30,000 square feet, will improve in                     throughout 2012, including
                                                               $15.00
         $10.56                            $4.44
         $11.52                            $4.08
                            Asking Rental Rates
         $11.76                            $5.16               $11.00
         $12.24
           $15.00                          $6.00                                                                                                                    9 | cassidyturley.com
         $13.42                            $6.10
         $12.72
           $11.00                          $5.64                $7.00
                                                                                                              Page 1
                                                              Land Forecast
                                                              Metropolitan Phoenix • Arizona • 2012


          With signs of a recovery in the housing             retail and employment, an abundance                              in the near future. Since the crash of
          market, home builders are expected                  of housing, and transportation routes.                           the real estate market, many of these
          to increase land and lot purchases in                                                                                sites have gone back to the lender or
                                                              Interest in multi-family and industrial
          mid-2012, albeit modestly. 2011 will                                                                                 the previous owner. Due to the rise of
                                                              zoned land is expected to increase
          go down as one of the worst years for                                                                                commodity prices such as cotton, many
                                                              in 2012. Demand for both finished
          single family permits in Metropolitan                                                                                farmers have re-entered the market
                                                              product types improved greatly in
          Phoenix. Permits are expected to be                                                                                  purchasing and leasing farmland. In
                                                              2011 and is expected to increase in
          around 7,500 at year-end 2011 with a                2012. As foreclosures remain elevated                            many instances, these parcels are
          modest increase in 2012 to 10,500.                  and conventional financing remains                               trading at a fraction of the price during
          On a positive note, active home listings            tight, demand for apartment units has                            the 2003 thru 2007 periods.
          have been dwindling throughout 2011                 increased driving occupancy and rental                           Despite challenging economic
          as foreclosures have been slowly                    rates up. Due to these circumstances                             conditions, Arizona is once again on
          declining since the first quarter of                multi-family and industrial developers                           Investors radars. For owners who have
          2009. Active home listings dropped                  are back in the market actively pursuing                         entitled, shovel-ready land in the
          below 30,000 for the first time since               land sites.                                                      path of development, 2012 will be a
          early 2006 and both detached new
                                                              During the height of the real estate                             good year to bring those properties to
          home and resale median home prices
                                                              boom, farmland on the edge of the                                market. 2012 will be a crucial year to
          held steady in 2011.
                          Year      Number of Permits         Valley was purchased at an alarming                              lock up prime land parcels for the next
s Price

          Median Sales 1988 vs. Median List Price
                        Price    15,085                       rate with plans to develop the land                              development cycle.
                            1989                 11,825
          350,000           1990                 10,614
                            1991                 13,677
                                                               Annual Housing Permits
          300,000

          250,000           1992                 18,654       Annual Housing Permits
                            1993                 22,226        Metro Phoenix
          200,000
                            1994                 26,852
          150,000
                            1995                 27,275       60,000
          100,000
                            1996                 27,742       50,000
           50,000           1997                 30,299
                                                              40,000
                0           1998                 35,385
                  4Q04 4Q05   4Q06
                            1999 4Q07 4Q08 4Q09 4Q10 4Q11
                                                 35,744       30,000
                            List Price Median Sales Price
                            2000                 32,563       20,000
                            2001                 33,932
                            2002                 35,326       10,000
                            2003
          Lenders sold most of the41,294           finished        0
                            2004                 61,754                   2004                      2006                     2008                 2010                  2012F
          lots and residential land 58,760 in
                            2005                  parcels
                            2006
          2008 thru 2011. 2012 is expected to    40,048
                            2007                 29,388
          experience more distressed commercial
                            2008                 13,242
          and industrial zoned land8,388 improved
                            2009                     and      Key Land Transactions 2011
                            2010                   7,106      Buyer            Seller                      Location                 Use Type         Acres   Sale Price (Millions)
          parcels changing hands. Investors are
                            2011                   7,458      Arcus Private    The Goldman                 Hwy 238 & 91st Ave       Master Planned 10,200      $32,500,000.00
          actively pursuing distressed prime
                            2012F                  8,800                       Sachs Group, Inc. 
                                                              Capital Solutions                                                     Development
          freeway interchange and hard corner                 Jen Partners LLC Angelo Gordon               Ocotillo Rd & Recker     Single Family     298      $23,000,000.00
                                                                               & Co                        Rd/NWC                   & Multi-Family
          sites. In many cases, these are once in
                                                              Gray Development MidFirst Bank               Scottsdale Rd &          Multi-Family/    4.31      $15,000,000.00
          a lifetime opportunities to own. Infill             Group                                        Camelback Rd/NNEC        Mixed Use
          sites are expected to receive most of               First Solar      DMB Holding LP              Signal Butte Rd/Elliot   Industrial     133.17      $11,601,916.00
                                                                                                           Rd/SWC
          the interest due to the fact that they are
                                                              El Dorado            First National          Loop 202 & Elliot Rd/    Mixed Use      128.64      $10,790,500.00
          usually located near utilities, existing            Holdings             Bank of Wynne           NEC


                                                                                                                                                         10 | cassidyturley.com
                                                                                Apartment Prices Per SQFT
                                                                         $130.00


                                                                         $100.00
108


                                                                       Multi-Family Forecast
118
                                                                          $70.00
116
 63
 63                                                                       $40.00
109                                                                    Metropolitan Phoenix • Arizona11 2012
                                                                               05     07      09      •




             After five years of inactivity, multi-                    Historical Multi-Family Permits                           reaching $776.00. The jump in
      Column3             Column4                                      Year-End
             family development will see signs of                                            Permits                             rental rates for key markets was even
             life in 2012. A lack of new deliveries                     8000
                                                                                                                                 higher with average rents of $927.00
             since 2007 and quarterly declines                                              MF Charts                            in Scottsdale, $882.00 in Chandler,
                                                                        6000
             in vacancy rates have created an                                                                                    $863.00 in Tempe and $857.00 in
             environment of need for new multi-                         4000                                                     Central Phoenix. For property owners
Vacancy Rate                       Column1 100 + units
          family product in key %                                                                                                the increase in rents has not come
01                            7.6 submarkets.                           2000
02        Scottsdale, Tempe .and Chandler will
                            9 46%                                                                                                at the expense of having to give up
                                                                            0                                                   15%
03
          lead the way with 9.90% for several
                             plans                                                04        06     08        10       12F        more, as concessions for new renters
04                          8.84%
          thousand new Chip .77% wave of new
    2038 per Eller  Blue units.6This                                                                                            10%
                                                                                                                                 continues to decline. For rents and
05                          6 1 42
06 3584 per Eller
          construction should7accommodate the
                            7. 8%                                                                                                absorption to continue an upward
                                                                        Over the past year vacancy rates in                       5%
07                         10.18%                                                                                                climb and a decline and a continued
08                         11 luxury
          need for additional.88% apartments,                           Metropolitan Phoenix dropped nearly
09        but because the 13.43% units are in
                           planned                                      300 basis points, ending 2011                            decline in concessions, there has
                                                                                                                                  0%
                                                                                                                                     04      06      08     10    12F
10                         10.80%                                                                                                to be improvement in the economy,
          the highest demand submarkets they                            below 8.5 percent. Eight out of 11
11                          8.40%
          should not result in5overbuilding. 2011                       submarkets had single-digit vacancy                      specifically job growth.
12F                         7. 0%
             will end the year with overall absorption                  rates. The Glendale/West Valley, East
                                                                                                                                Apartment Prices
           of over 5,000 units,
Average Apartment Prices per sft        about two percent               Phoenix and West Phoenix submarkets                     Per SF
                                                                                                                                     Apartment Prices Per SQFT
Year         of the Valley’s total Price Column1
                        partment inventory.                             continue to lag with vacancy rates
03                     $            61.00                                                                                       $130.00
                                                                        from that range from 11 to nearly
04                     $            75.00
05                     $            91.00 CoStar #s                     14 percent. These markets have not
                                                                                                                                $100.00
06                     $
            Vacancy Rate           111.00                 108           seen the same levels of improvement
07          Year-End   $           121.00                 118
                                                                        because their supply of multi-family                     $70.00
08                     $              106                 116
09                     $               72                 63            units were delivered later in the last
             15%
10                     $               66                 63            development cycle and a larger supply                    $40.00
11                     $               71                 109                                                                             05        07          09        11
             10%                                                        of single family residential rental
12F
                                                                        homes.
                5%
                                                                        Rents in Metropolitan Phoenix bounced                   Investor interest in Arizona and
              0%
Asking Rental Rates                Column1 Column2              Column3 back     Column4
                                                                              to 2007 levels with overall rates
                     04     06        08         10assA 12F                                                                     Metropolitan Phoenix remains strong.
                                                                                                                                                Permits
Last Nine Years                     Permits      Cl
                                                                        at the end of third quarter 2011                        Capitalization rates for multi-family
01                               7201
                                                                                                                                8000
02                               5351                                                                                           units are at or near record lows and
                                Page 1
03                               4836                                                                                           6000
04                               4997                                                                                           should remain at current levels through
            Key Multi-Family Transactions 2011
05                               3250                                                                                           2012. The loosening of capital markets
                                                                                                                                4000
06          Buyer                392 Per SQFT
                   Apartment Prices2
                                 Seller                   Property Name                Class # Units    Sale Price (Millions)   resulted in more available funds, and
07          Weidner Investments
             $130.00             6676
                                 Trillium Residential LLC Pinnacle Peak                  A      724           $76,000,000       2000
08                               6365                     Apartments
                                                                                                                                investors put multi-family properties at
09                                 637                                                                                             0
                                                                                                                                the top of the list for their desired asset
            AEW Capital
             $100.00             Pillar Communities,LLC GlenEagles                      A        330          $55,422,000              04     06      08      10     12F
10                                 500
11
            Management, L.P.
                                 1642                     2038 per Eller           Blue Chip 1642
                                                                                                                                class. The market saw a jump in the
12F         Pierce Education
              $70.00             250 Partners, LP
                                 JLB 0                    Block 1949
                                                          3584 per Eller               A     225              $52,000,000       number of complexes sold, as well as
            Properties
                                                                                                                                the price per unit/price per square foot
             Weidner Apartment       Spruce Grove Inc           Red Mountain Villas     A        768          $46,000,000
               $40.00                                                                                                           across all asset classes.
             Homes                                              Apartments
                           05         07         09             11
             Cornerstone Real        GID Investment LLC         Windsor at Mountain     A        360          $44,550,000
             Estate Advisers LLC                                Park Ranch



                                                                                                                                                         11 | cassidyturley.com
                                   Permits

             8000
                                                                                                                                                                    Office Graphs




                                                    Office Forecast
                                                                                                                                   Vacancy Rate
                                                    Metropolitan Phoenix • Arizona • 2012                      30%

                                                                                                               25%
                                                                                           Office Graphs
                                                                                                               20%
As a result of the financial crisis from          for potential build-to-suits. In 2012,                    tenants and a lack of strong new office
2007 to 2010, Arizona experienced                 small to midsize tenants with 1,000 to                    demand, although at a much slower
                                                                                                               15%

a major reduction in total non-                   20,000 SF requirements will make up                       pace. Proactive landlords that met
                                                                                                               10%
                                                                                                                    '04    '06     '08     '10    '12F
farm employment. Coupled with                     a majority of the greater Phoenix office                  new market conditions head-on will
                                                                Vacancy Rate
an oversupply of new and resale                   market demand. Increased interest
                                                30%                                                         continue to have success, but may
residential property, commercial real             from these tenants will gradually
                                                25%
                                                                                                            still face aggressive competition from
estate suffered a tremendous blow.                pick up throughout the coming year                                 Completions
                                                                                                                                  were Absorption
                                                                                                            new owners of whatvs. Netpreviously
                                                20%                                                              4
Commercial rental and sales prices                helping to absorb the remaining class A                   distressed assets. The reduced cost
                                                                                                                 3
plummeted and any momentum from                   vacancies and eventually reducing the
                                                15%                                                         basis and more stabilization evident
                                                                                                                 2
average job growth that occurred                  high vacancies in class B office space.
                                                10%                                                         will1allow these new owners to
                                                     '04     '06       '08       '10     '12F
                                                                                                                 0
between 2000 and 2005 came to a                                                                             potentially continue to drive average
                                                                                                                -1
grinding halt. Enter 2011, the year              Completion vs. Net Absorption                              rental rates downward between an
                                                                                                                -2
                                                 Year-End (In Millions of SF)                                        '04     '06     '08     '10    '12F
which should have marked a decided                                                                          additional 4 to 8 percent during 2012.
                                                      Completions vs. Net Absorption                                        Completions            Net Absorbtion
turn around to the economy nationally
                                                  4                                                         Asking Rental Rates
resulting in a rebound in Arizona’s               3                                                         Year-End ($/SF/Yr./Full Service)
                                                                                                                         Asking Rental Rates
economic growth. Our forecast for                 2
                                                                                                             $32.50
2011 was poised to hit its mark but               1
                                                  0
complications with the U.S. debt                                                                             $27.50
                                                 -1
ceiling and Europe’s debt crisis stalled         -2
                                      Office Graphs '04        '06       '08       '10     '12F
Arizona’s economy, along with that of                                                                        $22.50
                                                          Completions     Net Absorbtion
the nation.
                                                                                                             $17.50
                                                                                                                      '04      '06           '08          '10        '12F
                                                              Asking Rental Rates
 Vacancy Rate                                                                                                                      Class A             ClassB
                                                 $32.50
 Year-End                                            Stabilization of rental rates Valleywide
                Vacancy Rate
  30%
                                                     throughout 2012 will result in tenant’s
                                                 $27.50                                                     Several smaller tenants with newer
  25%                                                having options available to them to
                                                                                                            business models, with whom landlords
                                                 $22.50
                                                     either make lateral submarket moves
  20%                                                                                                       where willing to take a chance on
                                                     or venture to new locations/submarkets
  15%                                            $17.50                                                     during the economic downturn, will
                                                     within core urban '08
                                                        '04     '06       areas (inside the
                                                                                  '10    '12F
                                                                                                            continue to fill a niche and expand
  10%                                                              of the      101
                                                     boundaries Class A Loop ClassB& 202).
         '04   '06     '08      '10     '12F                                                                in-place due to business growth.
                                                     Suburban submarkets will continue to
                                                                                                            Gradual positive employment growth
                                                     see change in ownership, downward
                                                                                                            and personal savings will help to push
                                                     pricing pressure in order to attract
Looking ahead to 2012 landlords will
       Completions vs. Net Absorption                                                                       vacancy lower.
continue to face challenges related
   4
                                                    Key Office Leasing Transactions 2011                                                                                Page 1
to 3 property values, soft rental
   low
   2                                                Lessee/Buyer               Lessor/Seller          Property                       Submarket                  Size (SF)
rates and lack of substantial job                   Phoenix School of Law      Mitsubishi Real Estate 1 N. Central Avenue            Downtown South             205,130
   1
                                                                               New York, Inc.
growth. Large blocks of premier class
   0                                                United Healthcare          Liberty Property Trust 4425 E. Cotton Center Blvd     Airport Area               165,000
  office space have virtually all been
A -1
  -2
absorbed by tenants who made a “flight              Lexus Financial Services   Wells Real Estate      3200 W. Ray Road               Tempe South/       133,317
       '04     '06        '08       '10   '12F
                                                                               Funds                                                 Chandler
             leaving        remaining
to quality,”Completionsthe Net Absorbtion           Fennemore Craig            Florida State Board If 2394 E. Camelback Road         Camelback Corridor 121,000
                                                                               Administration
handful of very large corporate users
                                                    Fender Musical Instruments WDP 17600, LLC  Page 1 17600 N. Perimeter Dr          Scottsdale Airpark         119,681
in the marketplace with the option
            Asking Rental Rates
$32.50
                                                                                                                                             12 | cassidyturley.com
$27.50


$22.50
                                                                                     Vacancy Rate
                                                                14%
                                                                12%
                                                                10%
                                                                 8%



                                                               Retail Forecast
                                                                 6%
                                                                 4%
                                                                 2%
                                                                      '04          '06      '08            '10        '12F
                                                               Metropolitan Phoenix • Arizona • 2012

                                                                      Completions vs. Net Absorption

      Arizona will continue to parallel the                    will continue to drive much of the                                    We anticipate no new major speculative
      Nation from the standpoint of demand                     small shop leasing within Metropolitan                                development will occur until 2014.
      for retail products as consumers                         Phoenix. Fast casual food chains
                                                                                                                                     Repositioning of tenants to higher
      focus on their own financial well                        such as Five Guys Burgers and Fries,
                                                                                                                                     quality or better located space will not
      being. With retail job losses equal to                   Raisin’ Canes, Chipotle, Jimmy John’s
                                                                                                                                     result in positive net growth. The direct
      approximately 9 percent of all jobs lost                 and others will continue to wrestle '10
                                                         '04             '06            '08                                          average rental rates for grocery anchored
                                                                                                                                        '12
      from 2007 to 2011, weaker retailers                      for market control throughout the
                                                                          Completions Net Absorption                                 centers in Metropolitan Phoenix will
      suffered the most while larger, better                   Metropolitan Phoenix.
                                                                                                                                     be in the mid to high $20’s per square
      capitalized ones adapted to weak
                                                                                                                                     foot while unanchored strip centers will
      market fundamentals by imposing                          Median Household Income
                                                                            Median Household Income                                  see average rents in the mid teen’s per
      cost cutting measures which not only
                                                               $65,000                                                               square foot, both triple net.
      included layoffs but the retooling of
      their real estate needs. As a result,                    $50,000
                                                                                                                                     Lender owned retail properties will
      an over abundance of available big-                                                                                            continue to work their way through
      box retail space has spurred several
                                                               $35,000                                                               the pipeline offering opportunities for
      non-traditional alternative uses which                                                                                         investors to purchase these centers at
                                                               $20,000

      should continue throughout 2012. New
                                                                                  2000            2010             2011              below market replacement costs. After
                                                                                                                                                    Page 1
      concepts, such as pet food clubs and
                                                                                     U.S.         Maricopa County                    struggling with what to do with many
      charter schools, in addition to typical                                                                                        of these centers, specifically those that
      down market expansions of low cost                                                                                             have sat vacant or nearly empty for the
                                                               We believe late 2010 was the bottom
      fitness clubs, thrift stores and discount                                                                                      past two to three years, lenders and
                                                               for more desirable, premiere class A
      retailers looking for low lease rates will                                                                                     receivers will push to get these projects
                                                               properties, 2011 brought a sense of
      continue to open around the Valley.                                                                                            off their books in 2012, applying
                                                               steadiness to the overall fluctuation of
                                                                                  Retail
                                                                                                                                     downward pressure on prices. Rental
                                                               rates and that 2012 will see class B and
                                                                                                                                     rates and concessions will continue to
      Vacancy Rate                                             C properties bounce along the bottom
      Year-End                                                                                                                       favor tenants throughout 2012 with
                          Vacancy Rate                         as we slowly start the recovery process.
      14%
                                                                                                                                     overall vacancy dipping below 12
                                                               The centrally located submarkets will
      12%                                                                                                                            percent by year-end.
                                                               fair better than the suburban markets.
      10%
       8%
       6%
       4%                                                       Completion vs. Net Absorption vs. Net Absorption
                                                                                Completions
                                                                Year-End (In Millions of SF)
       2%
            '04         '06     '08         '10   '12F
                                                                8

                                                                6
      Other retail openings and expansions
          Completions vs. Net Absorption
                                                                4
      which were slated for 2011 will finally
      come to fruition in 2012. These                           2
      include national discount grocery store
                                                                0
      operator WinCo Foods opening three
      locations for approximately +/- 300,000                   -2
                                                                            '04                      '06                       '08                  '10               '12F
      square feet. Quick service retailers
                                                                                                                 Completions    Net Absorption
'04               '06                 '08          '10                 '12

                                                                                                                                                           13 | cassidyturley.com
                  Completions   Net Absorption
Cassidy Turley Company Information
Overview                                                        Regional Offices
Cassidy Turley is a leading commercial                          Atlanta, GA               Dayton, OH               Nashville, TN                  San Antonio, TX
real estate services provider with more                         Austin, TX                Denver, CO               New Orleans, LA                San Diego, CA
than 3,400 professionals in more than                           Baltimore, MD             Denver Tech Center, CO   New York, NY                   San Francisco, CA
60 offices nationwide. The company                              Baton Rouge, LA           Detroit, MI              Oakland, CA                    San Jose, CA
represents a wide range of clients—                             Bethesda, MD              El Cajon, CA             Oklahoma City, OK              San Rafael, CA
                                                                Boston, MA                Fort Collins, CO         Otay Mesa, CA                  Santa Clara,CA
from small businesses to Fortune 500
                                                                Burlingname, CA           Fort Worth, TX           Palo Alto, CA                  Somerset, NJ
companies, from local non-profits to                            Capitola, CA              Grosse Pointe, MI        Parsippany, NJ                 St. Louis, MO
major institutions. The firm completed                          Carlsbad, CA              Houston, TX              Phoenix, AZ                    Stamford, CT
transactions valued at $18 billion in                           Charlotte, NC             Indianapolis, IN         Pleasanton, CA                 Tampa, FL
2010, manages 455 million square                                Chicago, IL               Kansas City, MO          Raleigh, NC                    Teaneck, NJ
feet on behalf of private, institutional                        Cincinnati, OH            Milwaukee, WI            Redwood City, CA               Tysons Corner, VA
                                                                Columbia, MD              Minneapolis, MN          Rochester, NY                  Walnut Creek, CA
and corporate clients and supports
                                                                Columbus, OH              Monterey, CA             Sacramento, CA                 Washington, DC
more than 25,000 domestic corporate                             Dallas, TX                Napa, CA                 Salinas, CA                    W. Palm Beach, FL
services locations. Cassidy Turley serves
owners, investors and occupiers with a
full spectrum of integrated commercial                          Cassidy Turley Arizona
real estate services—including capital                          •	110	Professionals	(75	Agents,	35	Staff)             •	Headquarters:	Phoenix	
markets, tenant representation,                                 •	2011	Broker	of	the	Year,	Sales,	as	ranked		         •	Comprehensive	Client	Services
corporate services, project leasing,                              by Arizona Real Estate and                            Department including, Property
property management, project and                                  Development magazine                                  Management, Research,
development services, and research                                                       CAVE
                                                                •	Opened	Arizona	Office	in	1973,	                       Public Relations, Marketing,
and consulting.                                                                      CREEK
                                                                                             CAREFREE
                                                                  became affliate office in 2003                        Publishing,Mapping/GIS, and Web
                                                                                                                        Development


                                                                                                                     Mc Do well
                                                                                                                     Mo untain
                                                           PEORIA                                                       Par k        Fort
                                                                                                                                  Mc D ow e ll
                                                                                                                                   Ya v a p a i

                        White Ta nk      SURPRISE                         PHOENIX                                  FOUNTAIN
                                                                                                                                   Na t ion

                       Mo untain Par k
                                                                                                   SCOTTSDALE        HILLS
                                                                GLENDALE
Sun Valley Pkwy




                                                                                                                 Salt River
                                                                                             PARADISE          Pima-Maricopa
                                                                                                             Indian Community
                                                                                              VALLEY
                                                AVONDALE
                  BUCKEYE
                                  GOODYEAR              TOLLESON
                                                                                                                   MESA


                                          Estre lla Mounta in
                                                                      Phoe nix So uth Mo unt ain
                                                                                                   TEMPE                  GILBERT
                                                  Par k
                                                                                 Par k

                                                                                                             CHANDLER
                                                             Gila River
                                                          Indian Community
                                                                                                                                        QUEEN
                                                                                                                                        CREEK
Sources & Contributors
Contributors
Chris Jantz
Vice President Research
602.224.4485
cjantz@brephoenix.com

Zach Aulick
Senior Research Analyst
602.468.8521
zaulick@brephoenix.com

Alison Melnychenko
Marketing Director
602.468.4459
amelnychenko@brephoenix.com

Kelli Campbell Ruziska
Creative Services Director
602.468.8593
kruziska@brephoenix.com



Sources
Arizona State University, BLS Arizona,
Costar Group, Real Data, Inc., Department
of Commerce Research Administration,
Eller College of Management, ESRI,
Institute for Supply Management,
The Information Market per the Cromford
Report, The University of Arizona,
U.S. Census Bureau, U.S. Department
of Labor




                                            15 | cassidyturley.com

				
DOCUMENT INFO
Description: 2012 Real Estate Forecast Metropolitan Phoenix Arizona. On behalf of all our real estate professionals, I would like to thank you, our Clients and Colleagues, for your support and trust. Our relationship with you is the thing we value most and will never take for granted. For 2012 our promise is to help you meet your real estate goals now and in the future, taking advantage of every available opportunity. As a firm we are about to start our 40th year in business in Phoenix with what I believe is the best team in the industry. While we continued to face economic challenges in 2011, there is no doubt that we saw growth and stability in nearly every sector of the Arizona commercial real estate market. Multi-Family, Industrial and Capital Markets led the way with strong sale and absorption numbers. We believe that while the growth in Office, Retail and Land has been slower to return, there are definite signs of life in the market. As we look ahead to 2012 we anticipate continued improvement and hope that the year-end news of four straight months of job growth and improvement in the residential housing market are all signs that we are moving forward in our recovery. We are beginning the New Year in our elegant, remodeled office space. We survived the purging, packing and construction and the end result is we have a first class space that reflects the caliber of people inside of it. You are invited to come by anytime and see the new office. 2012 will bring one more transformation as we complete our rebranding efforts by dropping the BRE Commercial portion of our name. Along with our Western counterparts in Southern California, Northern California and Denver, we will be known as Cassidy Turley, leveraging the outstanding reputation and expertise of the company we are so proud to be a part of.