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Commercial Real Estate Market


									 Commercial Real Estate Market
 Lexington, Kentucky
 Mid Year 2010 Report
                                                                                           Commercial Real Estate
                                                                                           Vacancy Overview
                                                                                           Property            Vacancy         6 Month
                                                                                            Type                 Rate          Change
                                                                                             RETAIL               9.02%       ⇓ Decrease
                                                                                             SUBURBAN           17.31%        ⇑ Increase
                                                                                             OFFICE                             37.32%
                                                                                             CBD OFFICE          14.53%       ⇑ Increase
                                                                                             INDUSTRIAL          15.15%       ⇑ Increase
                                                                                           Survey includes nearly 400 commercial
                                                                                           properties comprising over 29 Million SF

Robust Recovery in 2010 Will Just Return U.S. to Mediocrity
NAI Global Chief Economist Dr. Peter Linneman
Strong, steady economic growth over the next two years will just return the U.S. economy to a pre-2008 level, giving us back
what we needlessly lost due to government-induced panic and poor lending practices. The key for the real estate sector is job
growth, as a recovery without jobs does not fill buildings. We anticipate that the next three years will continue to see average job
growth of 250,000 jobs per month, for a three-year job increase of at least 9 million jobs by early 2013.
That is robust job growth, but it is important to remember that our forecast would leave us with almost the same number of jobs
in mid-2013 as existed at the beginning of September 2008. Even with a robust recovery adding 9 million jobs over the next
three years, we will still have an anemic unemployment rate of 7%. Hence, we expect a robust rebound to mediocrity.

Where Does Lexington Fall on the Recovery Map?
Al Isaac, President, NAI Isaac Commercial Properties
Lexington’s commercial real estate market should rebound more rapidly than the country as a whole due to significantly
decreased new construction. Decreased new construction limited supply which contributed to the market not being over-built in
most categories. The suburban office market has shown the largest vacancy increase which correlates to the suburban office
market having had the largest amount of new construction beyond demand during the last several years. Lexington’s
commercial real estate market will continue to improve as job growth increases and existing inventory is absorbed.

Commercial Real Estate Services, Worldwide.
  Lexington, Kentucky
  Mid Year 2010 Market Report
NAI Isaac Commercial Properties’ Mid Year review of
commercial real estate activity in the Lexington Metropolitan
                                                                     Retail Vacant Space – 9.02%
area highlights activities for the first half of 2010. This report      Yr End ’09   700,000                                                            10.7%
provides an in-depth review of the commercial real estate               Mid Yr ‘10                                                    13.1%
market, evaluates the market trends and how they may                                 600,000                                                  12.5%
impact future performance.

NAI Isaac compiled and analyzed data on nearly 400                      Overall
commercial properties representing over 29 million square
                                                                      ⇓ 14.40%        300,000
feet of office, retail and industrial premises, of which,
approximately 3.8 million square feet is currently vacant.                            200,000

Lexington is uniquely positioned to continue its steady growth                        100,000                       0% 0%
and weather the economic uncertainty facing the nation, with                                   0
an economy fueled by a well-educated workforce, medical                                                           Regional        Neighborhood          Community
service, the University of Kentucky, agribusiness and tourism.                                                      Mall               Center            Power

Senior Contributing Editors                                          Office Vacancy– Suburban 17.3% | CBD 14.5%
                                                                        Yr End ’09   900,000
               Al Isaac
                                                                        Mid Yr ‘10   800,000
               Years Experience: Over 27 years                                       700,000                                    17.9%
               Specialty:         Retail & Office                       Office       600,000       Vacant SF
               Areas of Interest: Investments                           Overall
                                                                      ⇑ 37.32%       400,000
               Paul Ray Smith, Jr.                                                                                16.1%        10.6%
               Executive Vice President                                              300,000
                                                                                                                 16.4%                          18.1%
               Years Experience: Over 24 years                            CBD        200,000                                                    18.5%       11.3%
               Specialty:         Retail & Office                                    100,000
                                                                         Overall                                                                            9.1%
               Areas of Interest: Power & Community Centers              Increase          -
                                                                       ⇑ 5.55%                                  Sub Office Sub Office          CBD Office CBD Office
               Bruce R. Isaac                                                                                   Class A     Class B             Class A    Class B

               Senior Vice President
               Years Experience: Over 24 years                       Industrial Vacant Space – 15.15%
               Specialty:         Retail, Office & Industrial
               Areas of Interest: Sales, Leasing & Land Dev’t           Yr End ’09   700,000
                                                                        Mid Yr ‘10                                                                               13.5%
               Jim Kemper                                                                                           19.3%
               Vice President                                                        500,000                                                               10.2%
               Years Experience: Over 19 years                          Overall
               Specialty:         Retail & Office                                    400,000                   15.5%
               Areas of Interest: Power & Community Centers           ⇑ 32.83%       300,000
               John P. Miller                                                                                                 12.1%
               Broker Associate                                                      100,000                                                   5.8% 5.6%
               Years Experience: Over 15 years
               Specialty:         Mixed Use and Retail                                         0
               Areas of Interest: CBD Development                                                              Distribution      Manu-        High Tech      Bulk
                                                                                                                               facturing        R&D        Warehouse
The total GLA of the surveyed retail centers in the Lexington area is approximately 11.8 million SF in 102 centers. The
bulk of the retail center inventory lies within the Community/Power Centers category which accounts for approximately
6.1 million SF of the total GLA. Lexington continues to be a desirable market for national retailers. The slowdown in new
construction has kept the market in a good occupancy range and most of Lexington’s shopping centers have weathered
the recession well and remain in good shape.
  Retail vacancy                          Buildings           GLA (SF)            Available (SF)        Available (%)
 decreases 14%
                        Regional Malls           1             1,214,135                    0                  0%
    as tenants
 take advantage         Neighborhood            83             4,416,773              552,368               12.51%
 of more flexible       Community/ Power Ctr    18             6,141,443              509,797                8.30%
      terms.            Total                  102           11,772,351             1,062,165                9.02%

Rising vacancy was the continued trend for the Lexington suburban office market in the 1st half of 2010. Vacancy saw a
sharp increase to climb above the 17% mark from 13% at the close of 2009. This represented an increase of over
314,000 SF of available space - a 37% increase, with the bulk of the vacancy derived from 3 properties in the Newtown
Pike Corridor. While activity is increasing, the demand hasn’t kept pace with the surrender of some larger blocks of
space. While the Lexington CBD office market is composed of only 4 Class A buildings, the square footage is nearly the
same as Class B product. The downtown Lexington market saw a slight increase in vacancy during the 1st half of 2010,
reporting 15% vacancy, representing over 373,000 SF of availability.

    Most leasing        Suburban          Buildings           GLA (SF)           Available (SF)        Available (%)
  activity in the 1st   Class A                 42             1,801,422              290,102               16.10%
  half of 2010 was
   due to tenant        Class B                116             3,884,840              694,317               17.87%
   renewals and         Total                  158            5,686,062               984,419               17.31%
  relocations, but
   a sharp rise in
 vacancy will keep      CBD               Buildings           GLA (SF)           Available (SF)        Available (%)
   the suburban         Class A                  4             1,229,684              222,524               18.10%
    office market
                        Class B                 25             1,338,284              150,529               11.25%
competitive for the
balance of the year.    Total                  29             2,567,968               373,053              14.53%

This market continues to experience the effect of the US recession, ending the 1st half of 2010 with rising vacancy.
Overall vacant space among industrial facilities throughout Lexington increased to almost 1.4 million SF, a 15% vacancy.
The bulk warehouse market, Lexington's largest industrial market, totals over 4.4 million SF of product with over 602,000
SF vacant. Development will remain minimal for several quarters until the jobs lost since the start of the recession begin
to be replaced and sustained demand returns.
 Industrial vacancy                       Buildings           GLA (SF)             Available (SF)       Available (%)
     climbs with
                        Distribution            60             2,654,894              513,056               19.32%
  dependent upon        Manufacturing           14             1,090,271              210,959               19.35%
 steady job growth      High Tech/R&D           21              889,782                49,668                5.58%
   and an increase
    in production       Bulk Warehouse          15             4,452,210              602,610               13.54%
  pushing demand.       Total                  110            9,087,157             1,376,293               15.15%
   Committed to Central KY.
   Connected to the World.
                                                                         Committed to Central Kentucky.
                                                                         NAI Isaac is known for its market leadership, knowledgeable and experienced
                                                                         professionals and commitment to customer service. As a full service commercial
                                                                         brokerage company, NAI Isaac offers a comprehensive range of real estate
                                                                         services along with the experience required to handle your commercial real
                                                                         estate needs. Locally, we exclusively represent over 9 million square feet of
                                                                         commercial property with a combined market value in excess of $900 million.

                                                                         Connected to the World.
                                                                         As the exclusive local representative of NAI, the world's most extensive real
                                                                         estate services network, NAI Isaac’s affiliates are virtually everywhere – from
                                                                         Los Angeles to London, Memphis to Mexico City, and Taipei to Toronto – in over
                                                                         325 offices in 55 countries with 5,000 real estate partners. Our affiliation
                                                                         with NAI keeps our firm on the leading edge of the industry, while allowing us to
                                                                         maintain our local ownership and hometown loyalty.

                                                                         Build on the Power of Our Network.™
                                                                         The NAI Agent Team focuses on you, helping you make decisions that will
                                                                         benefit your business. That’s how you know that when it’s time to lease, buy, sell
                                                                         or invest – NAI Isaac can help you navigate successfully through real estate
                                                                         transactions and achieve your goals, whether you’re a growing Central
                                                                         Kentucky business or a large multinational firm.

                                                                                                                                                                            771 Corporate Drive

                                                                                                                                                                                      Suite 300
                                                                                                                                                                            Lexington KY 40503
Commercial Real Estate Services, Worldwide.                                                                                                                        

The data compiled in the Lexington Market Report is the legal property of NAI Isaac. Reproduction or dissemination of the information contained herein is strictly prohibited without the expressed written
consent of NAI Isaac. This report contains data, including information available to the public, which has been relied upon by NAI Isaac on the assumption that it is accurate and complete. NAI Isaac accepts
no responsibility if this should prove to be inaccurate or incomplete. No warranty or representation, expressed or implied, is made by NAI Isaac as to the accuracy or completeness of the information
contained herein, and same is submitted subject to errors, omissions, and changes in market conditions.

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