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					Portland, Oregon
Te n a n t ’ s     Guide              North        American              Markets                Third            Quarter                 2010




Overview                                                                    Major Transactions
Portland's market remains in the tenants' favor, though market              Tenant/Buyer                  Size         Type             Lease/Sale
complications exist. Portland's office market ended Q3 with an              Vestas American Wind          133,258      Office           Lease
overall vacancy rate of 8.8%, holding steady from the previous              PECI                          73,489       Office           Lease
quarter. Portland's industrial market also ended Q3 with an overall         ACS                           31,000       Office           Lease
vacancy rate of 8.8%.                                                       Lincoln Heritage              17,500       Office           Lease
                                                                            Extensis                      14,995       Office           Lease
Market Trends                                                               United Stationers             195,510      Industrial       Lease

  Ÿ Vacancy in the CBD will continue to drop over six months,               Nutrition Now                 190,294      Industrial       Sale
    reducing alternatives.                                                  Oracle                        90,792       Industrial       Renewal
  Ÿ Tenants should manage their expectations regarding free rent            Intel                         70,999       Industrial       Renewal
    and tenant improvements as landlords test a recovery                    Micropower                    62,175       Flex             Lease
    downtown. Some landlords have limited cash or require
    refinancing, so learn if terms are subject to lender approval
    before proceeding far in negotiations.
  Ÿ Sublease availabilities continue to provide excellent cost-            Vacancy Rate
    effective, short-term opportunities, though tenants should                                     Q1 2010       Q2 2010      Q3 2010
    inspect the credit quality of the sublandlord to avoid taking on
    excessive risk in a default.                                             20%
  Ÿ Lease restructuring continues to be an option for companies




                                                                                                                               14.4%
                                                                                                                               14.3%

                                                                                                                               14.3%




                                                                                                                                            13.4%
                                                                                                                     13.2%
                                                                                                                    13.1%
                                                                                                                    12.8%




                                                                                                                                          12.5%
                                                                                                                                          12.3%
    needing to right-size or reduce costs, with not more than two            15%



                                                                                                  11.2%
    years of existing lease term remaining.                                             9.7%




                                                                                               9.6%
                                                                                               9.5%
                                                                                      8.8%
                                                                                     8.1%



  Ÿ Suburban class A rents will continue to remain under pressure            10%

    for further softness. Downtown class A rents should hold firm
    as landlords test possible leverage created from stimulus leasing.        5%


                                                                              0%
Tenant's Perspective                                                                 Class A
                                                                                      CBD
                                                                                               Class B
                                                                                                CBD
                                                                                                                    Class A  Class B
                                                                                                                   Suburban Suburban
                                                                                                                                           R&D

The market continues to reset as demand lags to historic levels,
and a moderate level of commercial foreclosures continues. Well-
positioned owners should strike aggressive deals, keeping rates
low and buildings fuller. For Q4 we expect fewer space options,
the market firming downtown, and more aggressive tenant-side                Average Rental Rates
lease negotiations available in the western suburbs.                        CBD                    Q1 2010         Q2 2010        Q3 2010
                                                                            Class A Office         $25.80          $24.38         $25.80
Our recommendation for CBD and suburban office tenants remains              Class B Office         $21.95          $20.15         $20.16
to pursue 10-15% reductions in average rent from 2007 market
highs and to secure long-term, flexible lease terms to lock in              Suburban               Q1 2010         Q2 2010        Q3 2010
                                                                            Class A Office         $23.01          $23.24         $23.31
available savings. Our recommendation for industrial tenants is
                                                                            Class B Office         $18.20          $17.63         $17.70
similar if your space type and size is generic. However, if you need        R&D                    $10.25          $10.25         $10.51
large space, a unique configuration, or a specific location,
anticipate fewer choices with a broader spectrum of rates and
prices. As the recovery continues into 2011, expect to see the
pendulum swing to the landlord's favor. In cases where tenants
have unique requirements, the pendulum may swing sharply. Be
decisive as good deals may not be deliverable if a landlord's
internal or lender situation changes. Consider negotiating all the          Prepared By CresaPartners
way to lease drafts at two suitable properties to preserve leverage         One SW Columbia St., Suite 1610, Portland, Oregon 97258
and mitigate risk.                                                          503.598.3900 www.cresapartners.com

				
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