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Pricing Gap Over the Market

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Pricing Gap Over the Market Powered By Docstoc
					 Inland Empire
Industrial Market


Mid-Year 2009
When the year started………..
• Nearly 25 MSF of construction had been delivered
  in the 2008
• Economy - Collapsing, pervasive fear, real concern
            over the stability of the U.S. banking system

• User Mentality - “Like a Frightened Turtle…”
• User Activity - Can you spell “One Year Renewal?”
• Vacancy - 12.4% - approximately 100% increase year-
            over-year
• Buyer/Seller Pricing Gap - Huge!

• Landlord/Tenant Gap - Humongous!
Where are we at mid-year?
• Vacancy currently stands at 13.9% - compared to 12.4% at the end
  of 2008. Current availability in the Inland Empire is 16.8%.
• Rents down 25% - 40% from the market peak
• Property values down 30% - 50%
• Trends/concessions – rent relief, space         reductions, early
  terminations, etc. these requests have          decreased since
  4Q08/1Q09, but concerns remain
• Construction has virtually halted, planned projects have been
  shelved
• Land – no value? negative value? speculative buying?

• Owner/User Activity – increased due to attractive SBA lending

• The Inland Empire has a major pricing advantage over competing
  Southern California industrial submarkets
  Inland Empire – Historical Vacancy Rates



                                                              12.40%




                                                              11.60%
                                                6.20%
                                                                          13.90%
  4.10%                   6.10%
                                                5.70%
  4.30%
                          5.20%
                                                              10.00%
  4.90%                                         6.50%
                          4.70%
                                                                          12.90%

  6.40%                   5.10%                 5.70%          6.60%



2005                    2006              2007              2008       2009

          1st Quarter             2nd Quarter           3rd Quarter    4th Quarter
             Inland Empire – Construction Completion Square
                                Footage
                                                                                     24,742,075

25,000,000                       22,637,097            22,648,139


                                                                                    6,845,728

                                                      6,287,898
                                                                      18,114,801
20,000,000                       6,630,065


                                                                                    2,118,522
                 14,603,739
                                                                      5,416,052
15,000,000
                                 5,232,817            6,006,939

                6,274,776                                             3,133,564     9,428,755

10,000,000                                            3,170,928
                 775,881         6,133,212
                                                                      5,189,704
                2,912,882

                                                                                                          2,860,809
 5,000,000                                             7,182,374
                                                                                    6,349,070
                4,640,200        4,641,003                            4,375,481                          907,697
                                                                                                         1,953,112

        0
               2004             2005                 2006           2007           2008                 2009
                  1st Quarter                2nd Quarter            3rd Quarter           4th Quarter
             Inland Empire – Under Construction Square
                              Footage


20,000,000
                             16,870,599

                               77,440                             15,723,198
               14,603,739                  14,683,866
                                                                   48,013

                                            103,675
15,000,000      993,542

                                           3,126,479              5,330,783
                             8,721,350




10,000,000     8,894,203




                                           11,453,712

                                                                 10,344,402
 5,000,000                   8,071,809                                           2,402,216
                                                                                                2,025,635
               4,715,994
                                                                                 490,150       256,632
                                                                                               660,900
                                                                                 675,629
                                                                                1,236,437     1,108,103

        0
              2004          2005          2006                   2007          2008          2009
                             IE East                   IE West                 IE South
Inland Empire – Under Construction by City

                                                      Second Quarter 2009
                         Fontana
                                                             2,025,635 sf
               Ontario    1.72%
               5.98%
                                                Mira Loma
                                                 24.93%




                                                            Corona
 Victorville
                                                            12.67%
  41.96%




                                    Riverside
                                    12.74%
             Inland Empire – Overall Gross Absorption Square
                                Footage

                                  40,779,118
45,000,000


40,000,000                                                             33,253,021
                                  9,270,829             32,116,247
                 31,478,488
35,000,000

                                                                      7,355,608
30,000,000      7,856,208                               7,916,231
                                  9,534,776
                                                                                          21,684,831
25,000,000
                                                                      8,940,791
                6,131,732
                                                        8,826,726                          3,592,178
20,000,000
                                  9,722,639
                                                                                           5,206,676
15,000,000      9,164,915                                             7,965,588
                                                        8,281,983                                                 8,106,726
                                                                                           7,206,001
10,000,000
                                  12,250,874                                                                      3,479,392
                8,334,633                                             8,991,034
 5,000,000                                              7,091,307
                                                                                           5,679,976              4,627,334


        0
               2004              2005                2006            2007                2008                    2009
                   1st Quarter                 2nd Quarter           3rd Quarter                   4th Quarter

                                                                                                             *Leasing data as of June 17, 2009
                                                                                   Leasing data includes direct and sublease information.
              Inland Empire – Net Overall Absorption Square
                                Footage

30,000,000
                                                                                      26,576,1
                                                                                           47
                                                                                       4,146,157
25,000,000


             18,104,5                                                                 5,626,629
20,000,000        74
                                                                        14,841,3
              5,706,847                                                      98                    13,331,4     13,508,7
15,000,000                                                                                              33           20
                                                           10,096,9     4,580,676
                                                                                      9,969,764    3,187,062
                                                                                                                 1,984,786

              3,057,063
                               8,774,23                         49
10,000,000                           9
                                 220,683                    2,764,080    2,417,303                               4,599,378

                                             5,976,12                                              3,080,823

                                2,737,740
              6,105,306                             3
                                                                         4,279,572
                                              1,564,740     4,864,593                                            3,352,918
                                                                                                   4,272,705

 5,000,000                      3,869,452                                              6,833,597
                                                                                                                             -342,224
                                              4,908,817
               3,235,358                                    2,943,802    3,563,847                 2,790,843     3,571,638
                                                                                                                                            -5,386,171
                                1,946,364                                                                                      1,146,879
                                                                                                                                573,850
                                             -385,924       -475,526                                                            -97,456
        0                                     -111,510
                                                                                                                               -1,965,497    -2,608,661



                                                                                                                                             -2,777,510



-5,000,000
             2000              2001         2002          2003        2004           2005       2006           2007          2008           2009
                           1st Quarter                    2nd Quarter                   3rd Quarter                     4th Quarter
Notable Deals
Jasmine Distribution Center   650,000 sf     Fontana       Inv. Sale

IDS                           645,000 sf    Mira Loma       Lease

Trader Joe’s                  574,000 sf     Fontana         Sale

Dr. Pepper-Snapple            57 acres       Victorville     Sale

Kenco Logistics               517,000 sf     Redlands       Lease

Crocs                         407,515 sf      Ontario       Lease
O’Reilly Auto Parts           407,000 sf   Moreno Valley     Sale
Positive Signs???
• Increased User activity
• 8,106,726 SF of Gross Absorption YTD
• Vacancy growth is slowing
• Lack of construction could allow for 2009 positive net
  absorption
• The Inland Empire has a major pricing advantage over
  competing Southern California industrial submarkets
• Increased User in-migration to the Inland Empire from Los
  Angeles County
• Users are less concerned about LA/LB ports capacity and
  congestion, lower import traffic has created lower shipping
  costs

				
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