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					Metropolitan Chicago
Market Report | Year End 2008




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Table of Contents


 ABOUT THE FIRM .................... 3                                      INDUSTRIAL OVERVIEW ............... 21

 LOCAL ECONOMY .................. 4                                         INDUSTRIAL STATISTICS .............. 22

 OFFICE OVERVIEW ............... 5-7                                        INDUSTRIAL SUBMARKETS
                                                                                     Lake County .......................... 23
 GREEN BUILDINGS ................. 8
                                                                                     Southeast Wisconsin ............. 23
 OFFICE STATISTICS ................. 9                                               O’Hare ................................... 24
                                                                                     Central DuPage ..................... 25
 OFFICE SUBMARKETS
                                                                                     I-88 Corridor .......................... 26
          West Loop ...................... 10
                                                                                     I-55 Corridor .......................... 27
          Central Loop ................... 11
                                                                                     I-80 East/West Corridors ....... 28
          East Loop ....................... 12
          North Michigan Avenue ... 13                                      INDUSTRIAL LOGISTICS ............... 29
          River North ..................... 14
                                                                            METHODOLOGY/MAP .................. 30
          North Suburban .............. 15
          Northwest Suburban....... 16                                      RETAIL OVERVIEW........................ 31
          O’Hare Area .................... 17
                                                                            MULTIFAMILY OVERVIEW ........32-33
          East-West Corridor ......... 18
          I-55 Corridor ................... 19                              INVESTMENT OVERVIEW ........34-35

 METHODOLOGY/MAP ........... 20




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responsibility if this should prove to be inaccurate or incomplete. No warranty or representation, expressed or implied, is made by NAI Hiffman 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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Local Economy | Year End 2008

                                                                                      Chicago metropolitan area lost a total of 34,400 jobs. The
  Statistics                                                                          unemployment rate rose to 6.3%, up from 4.6% last year at
  Population (2008) ................................................. 9,804,475       this time. Nationally at the end of November, unemployment
  Population Change, 2000-2008 (est.) ......................... +7.8%                 stood at 6.7%, the highest it has been since 1993.
  Households (2008) ............................................... 3,516,729
                                                                                      While manufacturing still defines much of the Midwest,
  Median Household Income (2008 est.)..................... $67,234
                                                                                      Chicago benefits from its diversified base. The area is not as
  Gross Metro Product (2006) ................................$485 billion             dependant on autos, whose collapse has dragged down the
  Labor Force (2008) ............................................... 3,899,500        economies of neighboring states. Steel, however, remains a
  Jobs Gained Nov ‘07 - Nov ‘08 ................................(34,400)              focus for the region. With demand at less than 50 percent of
  Unemployment Rate (SA).............................................. 6.3%           capacity, the industry will continue to suffer in 2009.
  US Unemployment Rate (SA) ........................................ 6.7%
  Data as of Nov 2008 unless noted otherwise. Data from Bureau of Labor Statistics,
  Bureau of Economic Analysis, ESRI, IL Dept. of Employment Security                  Unemployment
                                                                                      in percent
                                                                                      seasonally adjusted                                                       7.0
Chicago, the third largest metropolitan area in the U.S.                              thru Nov 2008

after New York and Los Angeles, is the most influential                                                                                                         6.0
economic region between the East and West Coasts.
Situated at the geographical heart of the nation, Chicago’s
                                                                                                                                                                5.0
locational advantages have fostered its development into an
international center for banking, securities, high technology,
                                                                                            U.S.                                                                4.0
air transportation, business services, wholesale and retail                                 Metro Chicago
trade, and manufacturing. In addition, Chicago is one of
                                                                                                              2001 2002 2003 2004 2005 2006 2007 2008
the principal trading centers for commodities, financial,                              Bureau of Labor Statistics, Illinois Department of Employment Security
and derivative futures products. In 2008, Site Selection
                                                                                        8
magazine once again named Chicago the number one
destination for new or expanded corporate facilities projects                         In terms of office employment, bright spots in the region
in the nation, a position the city has held in six of the last                        are few. MillerCoors will add approximately 300 jobs once it
                                                                                        7

seven years.                                                                          opens its new headquarters in the city this year. And energy
                                                                                      giant BP PLC will create a few more positions as it moves
                                                                                        6
Chicago has a higher rate of employment in management,                                a portion of its workforce to the West Loop. However some
business & finance, and office & administrative job growth                            of5the area’s traditional large employers, such as Motorola
than the nation. Likewise it also has higher rates of production                      and Sears, are expected to continue to shed workers due to
and transportation & material moving occupations. This                                weak demand. Other local firms, such as Walgreens, Kraft,
                                                                                        4
indicates both an “office economy” as well as a “production”                          and Midway Games, also have announced job cuts.
and “distribution” economy. With one of the most diversified
economies of any region in the country, Chicago is less                               The forecast for the economy in 2009 is wait-and-see.
vulnerable to fluctuations in individual industries than most                         A great deal of uncertainty surrounds forecasts with
other large urban areas. The Chicago region’s considerable                            economists unsure whether the Federal Reserves’ recent
economic diversity is reflected in the ten largest publicly                           pump-priming or the proposed stimulus package working
traded companies headquartered here ranked by market                                  its way through Washington will help pull the nation out of
capitalization: Abbott Laboratories, McDonald’s Corp.,                                recession. Regardless, most forecasters are predicting a
Kraft Foods, Exelon Corp., Baxter International, Boeing,                              weak economy for all of 2009 with little sign of recovery
Walgreen Co., Caterpillar, Illinois Tool Works Inc., and Deere                        before 2010. Credit remains tight and growth rates are
& Company.                                                                            expected to hover around the zero mark. After two mild
                                                                                      recessions (1990-91 and 2001), the current down cycle
During the twelve months ending in November 2008, the                                 more closely resembles that of the early 1980s.




                                                                                                                                                                      4
                                                                                                                 NAI Hiffman Year End 2008 Market Report
Office Market | Year End 2008

  THE DOWNTOWN OVERVIEW
                                                                           Downtown Chicago Office Market
  With negative absorption in all five of the primary downtown
                                                                                            1.50m                                                               25%
  submarkets, the overall vacancy rate rose from 11.76%                                     1.25m
  in September to 12.18% at year end, yet still better from                                                                                                     20%
                                                                                            1.00m
  where it was last year at this time, at 12.45%. New sublease
                                                                               Vacancy       750k
  listings in the Central Loop submarket and vacancy in                                                                                                         15%
                                                                               in percent    500k
  the West Loop between tenant relocations were the main                                                                                                        10%
                                                                                             250k
  causes. Direct vacancy rose from 10.44% in September
                                                                               Absorption     0
  to 10.91% currently on light leasing activity. Sublease as a                 in SF                                                                            5%
                                                                                          (250k)
  percentage of inventory remains under the historic average                                                                                      -563K
                                                                                            (500k)                                                              0
  of 2 percent, but is expected to rise.                                                             4Q08       1Q08       2Q08        3Q08        4Q08


  2009 Trends:
  n   Relocation to newer more functional buildings accelerates
  n   Sublease listings increase due to recession              15.0
  n   Effective rents fall with increased landlord concessions 12.5
                                                                          Downtown Chicago Direct & Overall Vacancy
  n   Capital markets remain frozen at least through spring               in percent
                                                               10.0
                                                                7.5
  Construction continues on four major projects in5.0the
                                                                                                        12.96                 13.28
  downtown market, with the first, 300 N. LaSalle, scheduled
                                                         2.5
                                                                                             12.18                12.02
                                                                                                                                                        10.58
  for delivery at the end of the first quarter of 2009. Hines
                                                         0.0                                 10.91
                                                                                                        11.74      11.08      11.66       9.60

  and Levy’s joint project at 444 W. Lake is scheduled to
                                                        -2.5
                                                                                                                                          9.27
                                                                                                                                                        7.46
  start construction this winter or spring if they can secure
                                                        -5.0                   Sublease
  financing, perhaps the last major development of this cycle.1Q05                 3Q05
                                                                          2Q05 Direct         4Q05       1Q06          1Q05       2Q05           3Q05          4Q05   1Q06
  As these projects come online, vacancy rates will spike                                  Overall West          Central     East       N Mich      River
                                                                                          Downtown Loop           Loop       Loop        Ave        North
  in several markets. North Michigan Avenue and the East
  Loop will each lose major anchors. However the West Loop
  will have the greatest movement, either to the new towers
                                                          0.30
  in River North or to 155 N. Wacker. Sears Tower will be
                                                          0.25
  especially hard hit with the departure of GTCR and Ernst &             rises, look for landlord concession packages to increase as
  Young.                                                  0.20           owners desperately try to hold on to or attract the tenants
                                                                         in the market.
  As the credit crisis continues and the threat of deepened 0.15
  recession grows, the outlook for 2009 calls for increased           Capital markets remain frozen with little movement seen in
                                                            0.10
  sublease listings as tenants retrench. However, the market          the near-term. For example, Younan Properties has had to
  has a way to go to reach levels seen after the dot-com    0.05      extend the closing date of its purchase of Prime Group’s
  collapse earlier this decade when sublease reached almost           180 N. LaSalle three times since the deal was announced
                                                            0.00
  4 percent of inventory, or 2.7 million square feet. As vacancy over in September.
                                                                         west central east     nma    river

Downtown Construction Activity                                                  * office portion of a mixed use project + 24-story expansion of existing building

Property           Submarket                    Size (sf)   Leased/Preleased       Developer         Completion                       Status
22 W. Washington   Central Loop                *500,650           88%              Golub               July 2008                      Completed
300 N. LaSalle     River North                1,350,000           92%              Hines               Mar 2009                       Under Construction
155 N. Wacker      West Loop                  1,129,270           69%              The John Buck Co. Mid 2009                         Under Construction
353 N. Clark       River North                1,173,643           77%              Mesirow Financial  Late 2009                       Under Construction
300 E. Randolph    East Loop                  +700,000           100%              Blue Cross               2012                      Under Construction
444 W. Lake        West Loop                  1,100,000           63%              Hines/Levy          Mid 2011                       Proposed
210 S. Canal       West Loop                   *563,000            0%              Jones Lang/Amtrak         TBD                      Proposed

                                                                                                                                           Pictured above:
                                                                                               The Sears Tower, from where anchor tenant Ernst & Young
                                                                                                announced this quarter it was relocating to 155 N. Wacker.
  Office Market | Year End 2008

     THE SUBURBAN OVERVIEW                                                   Suburban Chicago Office Market
     New sublease listings and a drop off in leasing activity drove                              1.0m                                                       25%
     the overall vacancy rate in suburban Chicago to 20.62%,
     the highest it has been since the third quarter of 2005. Most                                750k                                                      20%
     of the new sublease space came from Class A properties,                                      500k
                                                                                  Vacancy                                                                   15%
     whose financial firms have been hard hit by the subprime                     in percent      250k
     crisis. While a few of these spaces were quickly leased out                                                                                            10%
     to other tenants, most remain vacant, waiting for signs of                                    0
                                                                                  Absorption
     an economic recovery. Class A vacancy across suburban                        in SF      -250k                                                          5%
     Chicago stands at 22.44%, up from 20.91% in September,                                                                 (571k)               (680k)
                                                                                                 -500k                                                  0
     and well up from the 19.22% recorded last year at this                                               4Q07     1Q08      2Q08      3Q08      4Q08
     time. Class B vacancy has actually fallen over the year, from
     21.33% at year end 2007, to 21.00% currently.

     As the economy has slowed, so has new construction.                    Suburban Chicago Direct & Overall Vacancy
     Only three projects representing 293,157 square feet were              in percent
     completed during the fourth quarter. Current construction is                                                   22.89
                                                                                                                               23.72
                                                                                                                                         20.82
     limited to a few smaller condominiums and medical offices,                                                                21.90
                                                                                                           17.41
     though Cisco Systems did sign a contract for the majority                                                      19.67
                                                                                                                                         18.06
     of a new 120,000-square-foot development near O’Hare,                                                                                          12.46
                                                                                                           13.35
     and pharmaceutical firm Astellas is considering build-to-suit                                                                                  12.06
     options in the North Suburbs. More speculative projects will
     have to wait for clearer signs of an economic recovery and                   Sublease
                                                                                  Direct
     a thawing of the credit markets.                         10.0
                                                                                                           North     NW      O’Hare     East-       I-55
                                                                   7.5                                                                  West
     As with construction, capital markets saw a sharp drop in
                                                               5.0
     activity as 2008 progressed. During the fourth quarter, only
     one major transaction was completed, Premises Group’s     2.5  will continue to climb. Landlords will employ enhanced
                                                                             0.30
     sale to K&K Holdings for $14.65 million ($136 PSF) of 1699     concession packages to retain and attract tenants to their
                                                                             0.25
                                                               0.0
     E. Woodfield in Schaumburg. And only one significant           buildings. The good news for the suburbs is that vacancy
                                                                             0.20
     project in Buffalo Grove is currently under contract.    -2.5  remains well under the highs experienced after the last
                                                          -5.0      recession when vacancy reached well over 23 percent in
                                                                             0.15
                                                               1Q05     2Q05    3Q05 4Q05   1Q06     1Q05   2Q05    3Q05   4Q05                                       1Q0
     With more layoffs expected in 2009 from some of the            late 2003.
                                                                             0.10
     area’s largest employers, suburban Chicago vacancy rates
                                                                                         0.05

  Suburban Construction Activity                                                         0.00
                                                                                                 1Q05      2Q05     3Q05      4Q05      1Q06
  Property                                    Market        Size (sf) Leased/Preleased Developer                            Completion           Status
  Woodland Falls Phase II, Mettawa            North         445,000       100%                  Hamilton Partners              Mar 2008          Existing
  Highland Landmark V, Downers Grove          East-West     250,545         0%                  OPUS North                     Apr 2008          Existing
  West Lake of Conway Park, Lake Forest       North         100,000       35%                   Duke Realty                    Apr 2008          Existing
  5450 Prairie Stone, Hoffman Estates         Northwest     110,000        12%                  JF McKinney/Conopco            May 2008          Existing
  27201 Bella Vista, Warrenville              East-West     148,500       84%                   Duke Realty                    May 2008          Existing
  Opus Gateway at the Glen, Glenview          North         130,000        0%                   OPUS North                     July 2008         Existing
  Rosemont Crossings, Rosemont                O'Hare Area   140,156        0%                   Duke Realty                    Nov 2008          Existing
  120 Liberty Place, Wheaton                  East-West     117,996       84%                   GlenStar Properties            Nov 2008          Existing

  7001 N. Frontage Rd., Burr Ridge            I-55          104,000       67%                   Missner Group                  Late 2009         Under Const.
  River Rd., Chicago                          O’Hare        121,000       67%                   Harp Group/Ryan Cos.                 TBD         Proposed


Pictured above:
1699 E. Woodfield, Schaumburg, recently sold by Premises
Group to K&K Holdings for $14.65 million.
                                                                                                                                                                  6
                                                                                                         NAI Hiffman Year End 2008 Market Report
Office Market | Year End 2008

 Blocks of Contiguous Space - in sf                         Downtown Sublease Space
                                                            as a percent                                                         7.0
                           20,000+    50,000+   100,000+    of inventory
 West Loop Class A              66         28         13                                                                         6.0
 West Loop Class B              16          7          1                                                                         5.0
 West Loop                      82         35         14
                                                                                                                                 4.0
 Central Loop Class A          35         11          1                                                                          3.0
 Central Loop Class B          23         11          3
 Central Loop                  58         22          4                                                                          2.0

                                                                 Class A                                                         1.0
 East Loop Class A             34         11          4          Class B
 East Loop Class B              9          2          2                           2000 2001 2002 2003 2004 2005 2006 2007 2008
 East Loop                     43         13          6

 N. Michigan Ave Class A       22          3          1
 N. Michigan Ave Class B        8          0          0                    0.07
 N. Michigan Ave               30          3          1     Suburban Sublease Space
                                                                     0.06
                                                            as a percent                                                         7.0
                                                                           0.05
 River North Class A           10          0          0     of inventory
                                                                                                                                 6.0
 River North Class B           13          4          2                    0.04
 River North                   23          4          2                                                                          5.0
                                                                           0.03
                                                                                                                                 4.0
 Downtown Class A             167         53         19                    0.02
 Downtown Class B              69         24          8                    0.01                                                  3.0
 Downtown                     236         77         27
                                                                                                                                 2.0
                                                                           0.00
 North Suburban Class A        43         15          5          Class A                                                         1.0
 North Suburban Class B        23          5          0          Class B
 North Suburban                66         20          5                           2000 2001 2002 2003 2004 2005 2006 2007 2008

 NW Suburban Class A           60         26         11
 NW Suburban Class B           44          8          3
 NW Suburban                  104         34         14                    0.07
                                                           Sublease vacancy as a percentage of total inventory has
                                                                         0.06
 O'Hare Area Class A           34          9          2
                                                           declined sharply in most markets from the highs just after
 O'Hare Area Class B           16          6          3                  collapse earlier this decade. However, sublease
                                                           the dot-com 0.05
 O'Hare Area                   50         15          5                  been
                                                           listings have 0.04 on the rise in recent quarters, a trend that
                                                           is expected to continue with the financial crisis and coming
                                                                         0.03
 East-West Class A             56         11          4    tenant relocations into new construction toward the end of
 East-West Class B             52         11          5                  0.02
 East-West                    108         22          9    2009. Already available sublease space totals over 4.5 million
                                                           square feet. 0.01
 I-55 Corridor Class A          2          1          1                    0.00
 I-55 Corridor Class B          4          2          0    In the suburbs, sublease space also has been on the decline
 I-55 Corridor                  6          3          1    until fairly recently when the subprime mortgage crisis
 Suburban Class A             195         62         23    impacted firms in the East-West Corridor and Northwest
 Suburban Class B             139         32         11    Suburbs. New blocks of sublease space emerged in the
 Suburban                     334         94         34    fourth quarter in all but the I-55 Corridor market. While some
                                                           of the more ‘value-priced’ blocks leased quickly, others will
 Chicago Class A              362        115         42
                                                           have to wait for significant economic recovery. Expect more
 Chicago Class B              208         56         19
 Chicago                      570        171         61    substantial blocks to come to market during 2009 as local
                                                           firms face continued recessionary pressure.

                                                                                                                   Pictured above:
                                                                    1400-1500 American Ln, Schaumburg, where Zurich Financial is
                                                                    expected to put 225,000 SF of sublease on the market in January.
Office | Green Buildings

                                                                                                  In     2004,       Exelon
   Statistics
                                                                                                  Corporation         began
   LEED Properties .............. # of Bldgs. ...........Square Footage                           consolidating      several
        Certified .................................... 3 ................... 1,641,524            Chicago-area offices into
        Silver ........................................ 8 ................... 7,565,704           220,000 square feet of
        Gold ......................................... 6 ................... 3,738,685
                                                                                                  renovated space at the
        Platinum ..................................*1 ...................... 220,000
                                                                                                  landmark Chase Tower
   Energy Star ..................... # of Bldgs. ...........Square Footage                        in the Central Loop. In
        Downtown .............................. 28 ................. 21,333,564                   2007, this headquarters
        Suburbs ................................. 31 ................... 7,950,807                space       became      the
  Square footage approximate based on CoStar, USGBC data. Includes single tenant and multi-
                                                                                                  largest office space in the
  tenant commercial office projects.         * LEED Platinum listing is a commercial interior.    U.S. to earn a Platinum
                                                                                                  rating from LEED for
The deepening recession will most likely impact the volume                                        Commercial Interiors.
of new green building certifications as construction slows,
but the movement toward more environmentally friendly                                             Energy efficient strategies employed in the renovation
office towers is far from over. Green buildings can succeed                                       include ENERGY STAR equipment, demand-based
even in a recession because the strategies employed in                                            ventilation, and controllable task lighting for every
their building and operation generally pay for the added                                          employee. The project is expected to use 43 percent
initial cost of green construction within a relatively short time                                 less energy than its previous offices. Through energy
frame. And as vacancy continues to rise, green buildings                                          savings alone, Exelon will now save enough to pay for the
not only are cost-effective in terms of maintenance and                                           project’s green features in less than five years.
operation, they give their landlords a marketing edge
against competing spaces, bringing real value to tenants.                                         Exelon also selected low chemical emission paints and
                                                                                                  coatings, green cleaning products, and recycled one-third
Green construction continues to expand both here and                                              of all the furniture from other offices. Efficient plumbing
abroad. The value of green construction is projected to                                           fixtures reduce the project’s use of water by 31 percent
increase to $60 billion by 2010 in Europe and the US. And                                         compared with conventional offices.
as early as this year (2009), 80 percent of corporate America
is expected to be greening at least 16 percent of their real
estate portfolios.

Green Office in Chicago
While the green movement is relatively new, Chicago already                                      LEED certification in mind. Currently in the suburbs, two
has several buildings that have earned various levels of                                         newly delivered projects have achieved LEED certification -
LEED certification, one of the main green standards for                                          HSBC’s new regional headquarters at Mettawa in the North
office projects. As development costs tend to be higher                                          Suburbs, and Calamos Real Estate’s Citygate Center I in
than simply building to code, most LEED certified office                                         Naperville. As interest in green design grows, watch for the
projects have been build-to-suit or single tenant facilities.                                    list of LEED buildings to expand.
These include the CTA headquarters at 567 W. Lake in the
West Loop and Aquascape Design headquarters in west                                              According to CoStar, currently a total of 28 multi-tenant
suburban St. Charles. However, this is beginning to change.                                      office buildings in downtown Chicago are ENERGY STAR
                                                                                                 rated with another 31 in the suburbs. As achieving ENERGY
Looking forward, green buildings will become the state-                                          STAR is part of the latest LEED certification standards,
of-the-art standard for most major developments in years                                         look for the list of rated building to grow as owners see the
to come. All the major construction projects currently                                           benefit of long-term energy conservation strategies both in
underway downtown are being built with some level of                                             terms of saving money and in attracting tenants.

Pictured above:
Woodland Falls Corp. Center, Mettawa, certified LEED Gold NC.


                                                                                                                                                                 8
                                                                                                                    NAI Hiffman Year End 2008 Market Report
  Office Statistics
                                             Market       Direct     Overall         4Q08            2008         4Q08        Under      Asking
Office Market                 Bldgs.           Size     Vacancy     Vacancy     Absorption      Absorption Construction Construction Rental Rate
Downtown
   West Loop A                     32     28,767,638      12.06%      13.19%      (468,708)       (328,967)           0     1,129,270     $38.64
   West Loop B                     42     11,293,931      11.43%      12.92%        (27,981)      (226,700)           0             0     $28.37
   West Loop C                     46      3,968,054      10.33%      11.47%        142,670         160,284           0             0     $24.60
   West Loop Total                120     44,029,623      11.74%      12.96%      (354,019)       (395,383)           0     1,129,270     $34.54

     Central Loop A                23     18,231,077       8.45%       9.38%        273,216        654,243            0            0      $37.59
     Central Loop B                33     16,828,017      14.65%      15.82%      (387,649)       (248,584)           0            0      $27.45
     Central Loop C                30      4,194,539       8.19%       8.20%         (8,413)       100,094            0            0      $23.20
     Central Loop Total            86     39,253,633      11.08%      12.02%      (122,846)        505,753            0            0      $31.45

     East Loop A                   10     10,811,960      10.02%      12.60%        (31,004)       170,818            0       700000      $34.95
     East Loop B                   19      7,113,450      13.96%      15.32%          42,231       381,814            0            0      $25.85
     East Loop C                   43      5,900,244      11.91%      12.07%        (28,642)        36,640            0            0      $20.42
     East Loop Total               72     23,825,654      11.66%      13.28%        (17,415)       589,272            0       700000      $28.63

     N. Michigan Ave. A            12      6,633,203      10.50%      10.77%        (28,924)       269,060            0            0      $37.03
     N. Michigan Ave. B            34      6,132,947       8.21%       8.66%          (9,600)      (43,730)           0            0      $27.96
     N. Michigan Ave. C            20      1,180,624       7.93%       7.93%             265       (37,657)           0            0      $21.54
     N. Michigan Ave. Total        66     13,946,774       9.27%       9.60%        (38,259)       187,673            0            0      $31.73

     River North A                  4      1,575,631       5.01%       9.37%        (37,046)      (110,159)           0     2,523,643     $31.00
     River North B                 42      5,818,774       8.10%      12.17%          16,270         66,535           0             0     $25.73
     River North C                 80      3,725,977       7.49%       8.61%          (9,381)       (57,562)          0             0     $23.21
     River North Total            126     11,120,382       7.46%      10.58%        (30,157)      (101,186)           0     2,523,643     $24.49

     Downtown    A                 81    66,019,509       10.40%      11.71%      (292,466)        654,995            -     4,352,913     $37.42
     Downtown    B                170    47,187,119       12.13%      13.67%      (366,729)        (70,665)           0             0     $27.29
     Downtown    C                219    18,969,438        9.64%      10.15%         96,499        201,799            0             0     $22.57
     Downtown    Total            470   132,176,066       10.91%      12.18%      (562,696)        786,129            -     4,352,913     $31.51

Suburban
    North Suburban A              129     15,735,228      15.47%      20.33%      (594,726)         (40,827)          0            0      $26.87
    North Suburban B              253      9,875,431      11.35%      14.80%          9,013         (30,121)          0            0      $21.53
    North Suburban C              141      3,224,206       9.19%      10.36%        (12,530)        (54,108)          0            0      $17.26
    North Suburban                523     28,834,865      13.36%      17.32%      (598,243)       (125,056)           0            0      $23.88

     NW Suburban A                113     17,561,969      21.71%      26.61%      (160,359)       (251,912)       35,005           0      $23.86
     NW Suburban B                302     11,555,123      18.91%      20.37%       127,502          (58,810)           0           0      $18.42
     NW Suburban C                154      3,086,319      10.87%      11.14%         10,861          92,049            0           0      $14.81
     NW Suburban                  569     32,203,411      19.67%      22.89%       (21,996)       (218,673)       35,005           0      $20.93

     O’Hare Area A                 35      7,896,201      21.32%      23.60%        (40,974)      (264,736)      140,156           0      $26.30
     O’Hare Area B                 99      5,989,097      24.89%      26.39%        (25,469)        (31,479)           0           0      $18.10
     O’Hare Area C                 48        995,550       8.55%       8.55%          (3,232)       (11,259)           0           0      $15.95
     O’Hare Area                  182     14,880,848      21.90%      23.72%        (69,675)      (307,474)      140,156           0      $22.29

     East-West Corridor A         140     20,740,904      17.31%      20.36%         45,932       (275,599)      117,996           0      $25.71
     East-West Corridor B         339     16,168,475      21.14%      24.34%        (25,471)        166,312            0           0      $18.77
     East-West Corridor C         180      5,096,026      11.36%      11.57%        (16,675)        (65,289)           0           0      $15.23
     East-West Corridor           659     42,005,405      18.06%      20.82%          3,786       (174,576)      117,996           0      $21.76

     I-55 Corridor A               11        715,216      13.64%      13.64%           (345)       (16,774)           0            0      $23.52
     I-55 Corridor B               55      2,579,756      13.63%      14.17%            533         88,880            0            0      $19.64
     I-55 Corridor C               21        684,723       4.49%       4.80%          5,494         13,557            0            0      $16.57
     I-55 Corridor                 87      3,979,695      12.06%      12.46%          5,682         85,663            0            0      $19.74

     Suburban   A                 428    62,649,518       18.59%      22.44%      (750,472)       (849,848)      293,157           0      $25.53
     Suburban   B               1,048    46,167,882       18.56%      21.00%          86,108        134,782            0           0      $19.23
     Suburban   C                 544    13,086,824       10.13%      10.58%        (16,082)        (25,050)           0           0      $15.75
     Suburban   Totals          2,020   121,904,224       17.64%      20.62%      (680,446)       (740,116)      293,157           0      $22.03

     Metro Chicago A              509   128,669,027       13.06%      16.93%     (1,042,938)      (194,853)      293,157    4,352,913     $31.65
     Metro Chicago B            1,218    93,355,001       14.70%      17.30%       (280,621)        64,117             0            0     $23.39
     Metro Chicago C              763    32,056,262        9.81%      10.33%          80,417       176,749             0            0     $19.80
     Chicago Totals             2,490   254,080,290       13.24%      16.23%     (1,243,142)        46,013       293,157    4,352,913     $27.01


Note: Inventory, Absorption and Construction Completions are expressed in net
rentable square feet. Rental rates are an average weighted gross rate.
  Office | West Loop

       Statistics
       Market Size ........................................................ 44,029,623            West Loop Office Market
       Overall Vacant Space (SF)..................................... 5,708,429                                          1.0m                                                         25%

       Overall Vacancy ........................................................ 12.96%                                   750k                                                         20%
       Sublease Vacancy ...................................................... 1.22%                                     500k
                                                                                                        Vacancy                                                                       15%
       4Q08 Absorption (SF) .............................................(354,019)                      in percent       250k
       2008 Absorption (SF) ..............................................(395,383)                                                                                                   10%
                                                                                                                           0
       Gross Direct Rental Rate (PSF) .................................. $34.54                         Absorption
                                                                                                        in SF      -250k                                                               5%
       4Q08 Construction Completions (SF).................................. 0
       Under Construction (SF) ....................................... 1,129,270                                         -500k
                                                                                                                                  4Q07      1Q08       2Q08       3Q08       4Q08
                                                                                                                                                                                      0



     MARKET OVERVIEW
     During the fourth quarter, vacancy rose on negative                                         West Loop Weighted Rents
                                                                                                                                                                                    34.54
     absorption primarily in Class A properties. The overall
                                                        10.0                                     in gross $ per SF per year                                              32.99
                                                                                                                                                              29.45
     vacancy rate rose from 12.16% in September to 12.96% 7.5
                                                                                                                                      28.91        28.99

     in December, up from 12.07% last year at this time. Class
                                                          5.0
     A vacancy likewise jumped from 11.56% to 13.19% during
     the fourth quarter, up from 12.05% at year end 2007. 2.5
                                                           from
     Vacancy also increased in Class B properties, moving 0.0
     12.67% in September to 12.92% currently, up from 10.91%
                                                         -2.5
     in December 2007.
                                                                                 -5.0
                                                                                         1Q05    2Q05      3Q05           4Q05      1Q06        1Q05           2Q05       3Q05      4Q05     1Q06
     MARKET OUTLOOK                                                                                                                  2004      2005           2006       2007       2008
     While the drop in demand appears dramatic, some of the
     losses recorded this quarter will be filled in coming quarters                                              35
     by tenants such as BP and Dykema Gosset, both of which                                     to that, UBS and PriceWaterhouseCoopers, both anchors at
                                                                                                            30
     have leased substantial blocks of space at 10 & 30 S.                                      One North Wacker, are beginning to look at alternatives for
     Wacker that now are vacant. However, 2009 will see the                                                 25
                                                                                                a 2012 or 2013 move. Sublease listings have yet to emerge
     delivery of three new towers representing some 3.6 million                                 as a major factor in the West Loop submarket. However, as
                                                                                                            20
     square feet and a major reshuffling of anchor tenants across                               the recession continues, look for more and more sublease
                                                                                                            15
     the downtown market. Vacancy rates will no doubt increase                                  space to come to market.
                                                                                                            10
                                                                                                                                  italics denotes NAI Hiffman transaction
     as new space comes online toward the middle of 2009. Add
                                                                                                                     5
                                                                                                                     0
  Major West Loop Lease Transactions                                                                                       1Q05      2Q05      3Q05          4Q05     1Q06

  Tenant                                                                 Address                                           Size (SF)          Comments
  Ernst & Young US LLP                                                   155 N. Wacker Dr.                                  204,000           Relocation from Sears Tower
  MillerCoors LLC                                                        250 S. Wacker Dr.                                  129,000           New lease
  DRW Holdings LLC                                                       540 W. Madison St.                                 125,000           Relocation from 10 S. Riverside
  Dykema Gossett PLC                                                     10 & 30 S. Wacker Dr.                              107,000           Expansion
  FDIC                                                                   300 S. Riverside Dr.                                61,124           Relocation from 500 W. Monroe
  Wind Point Partners L.P.,                                              444 W. Lake St.                                     24,200           Pre-construction leasing
  Water Street Healthcare Partners LLC                                   233 S. Wacker Dr.                                   14,198           Expansion

  Major West Loop Sale Transactions
  Address                           Size (SF)                       Price (mil)      Price PSF       Buyer                                          Seller
  none

Pictured above:
One North Wacker, where two anchors are shopping the market for
a possible move in 2012 or 2013.
                                                                                                                                                                                            10
                                                                                                                                 NAI Hiffman Year End 2008 Market Report
Office | Central Loop

    Statistics                                                                                 Central Loop Office Market
    Market Size ........................................................ 39,253,633                                1.0m                                                          25%
    Overall Vacant Space (SF)..................................... 4,716,481
                                                                                                                   750k                                                          20%
    Overall Vacancy ........................................................ 12.02%
                                                                                                                   500k
    Sublease Vacancy ...................................................... 0.93%                   Vacancy                                                                      15%
                                                                                                    in percent     250k
    4Q08 Absorption (SF) .............................................(122,846)
                                                                                                                                                                                 10%
    2008 Absorption (SF) ............................................... 505,753                                     0
                                                                                                    Absorption
    Gross Direct Rental Rate (PSF) .................................. $31.45                        in SF      -250k                                                              5%
    4Q08 Construction Completions (SF).................................. 0
                                                                                                                   -500k                                                         0
    Under Construction (SF) ..................................................... 0                                         4Q07      1Q08       2Q08        3Q08       4Q08



  MARKET OVERVIEW
  Vacancy rose during the fourth quarter in the Central Loop                                  Central Loop Weighted Rents
  as the arrival of Morningstar was more than matched by                                      in gross $ per SF per year
                                                                                                                                                                               31.45
                                                                                                                                                                    29.50
  new direct listings of former ABN Amro/LaSalle Bank space.                                                                    27.02        27.37      26.17
  The overall vacancy rate rose from 11.70% in September
  to 12.02% currently. Morningstar moved into its new home
  at 22 W. Washington, which helped to drive down Class A
  vacancy to 9.38% in December from 10.88% in September.
  However, ABN Amro/LaSalle Bank, acquired last year by
  Bank of America, vacated a 300,000-square-foot block at
  135 S. LaSalle, helping to drive Class B vacancy up from
  13.52% in September to 15.82% currently.                                                                                      2004     2005           2006        2007       2008
                                                        10.0

                                                                                7.5
  MARKET OUTLOOK
                                                                                                             35
  While the economic downturn will prove challenging5.0    for
                                                                                                             30
  the Central Loop, home to many of Chicago’s financial  2.5
  firms, at least the area is not losing any major tenants to                                rent and concession packages in order to hold on to
                                                                                                        25
                                                         0.0
  new construction coming online in 2009. However, the                                       tenants. PrivateBancorp’s listing at 70 W. Madison is
                                                                                                        20
  holes created by tenant relocations in other downtown -2.5                                 probably just the first of several new blocks of sublease
                                                                                                        15
  submarkets will challenge Central Loop landlords to match
                                                        -5.0
                                                                                             space that will appear in coming quarters.
                                                                                      1Q05    2Q05          10
                                                                                                          3Q05        4Q05     1Q06            1Q05       2Q05        3Q05      4Q05   1Q06
                                                                                                               5
Major Central Loop Lease Transactions                                                                          0
                                                                                                                     1Q05      2Q05     3Q05          4Q05       1Q06
Tenant                                                                Address                                      Size (SF)       Comments
Barclays Bank                                                         190 S. LaSalle St.                           110,000         Assumed lease from Lehman Bros.
Robbins Schwartz Nicholas Lifton & Taylor                             55 W. Monroe St.                              18,638         Relocation from 20 N Clark




Major Central Loop Sale Transactions
Address                            Size (SF)                     Price (mil)      Price PSF       Buyer                                        Seller
180 N. LaSalle St.                               770,191              $124.0           $161       Younan Properties                            Prime Group - delay in closing

                                                                                                                                                                 Pictured above:
                                                                                                                                                                        its recent
                                                                                                         190 S. LaSalle, where Barclays Bank assumed the lease of project
                                                                                                                                        * office portion of a mixed use
Major Central Loop Construction                                                                                                                  acquisition, Lehman Brothers.
Property                      Size (sf)                    Stories         Leased      Developer                      Completion         Anchors
22 W. Washington             *500,650                           16         88%         Golub                            July 2008        Morningstar, CBS
   Office | East Loop

        Statistics                                                                                  East Loop Office Market
        Market Size ........................................................ 23,825,654                                   1.0m                                                         25%
        Overall Vacant Space (SF)..................................... 3,163,556
                                                                                                                          750k                                                         20%
        Overall Vacancy ........................................................ 13.28%
                                                                                                                          500k
        Sublease Vacancy ...................................................... 1.61%                    Vacancy                                                                       15%
                                                                                                         in percent       250k
        4Q08 Absorption (SF) ...............................................(17,415)
                                                                                                                                                                                       10%
        2008 Absorption (SF) ............................................... 589,272                                       0
                                                                                                         Absorption
        Gross Direct Rental Rate (PSF) .................................. $28.63                         in SF      -250k                                                              5%
                                                                                                                                                                 * price allocated, portfolio sale
        4Q08 Construction Completions (SF).................................. 0
                                                                                                                      -500k                                                            0
        Under Construction (SF) .......................................... 700,000                                                4Q07      1Q08      2Q08       3Q08        4Q08


                                                                                     10.0
     MARKET OVERVIEW
                                                              7.5
     Vacancy in the East Loop rose at year end 2008, breaking                                       East Loop Weighted Rents
     a thirteen quarter streak of positive absorption. Overall5.0                                   in gross $ per SF per year

     vacancy rose from 13.20% in September to 13.28%          2.5                                                                                                        26.76
                                                                                                                                                                                     28.63

     in December, still well down from year end 2007 when                                                                                23.81     24.18      24.43
                                                              0.0
     vacancy stood at 15.75%. Class A vacancy also increased
     this quarter, rising from 12.31% in September to 12.60% in
                                                             -2.5
     December. Class B vacancy continued to decline, dropping-5.0
                                                                                            1Q05      2Q05       3Q05          4Q05      1Q06         1Q05       2Q05       3Q05        4Q05         1Q06
     from 15.91% to 15.32% during the same period. While still
     low, sublease listing have begun to rise in this submarket.

     MARKET OUTLOOK                                                                                                                      2004      2005      2006       2007        2008
     Added to the pressure the economic slowdown will have
     on the entire Chicago office market, the East Loop will be                                    Center to its new home in River North at the end of the
                                                                                                                 35
     one of the first to be hit by the coming wave of office tenant                                first quarter. Several other tenants will follow in the next few
                                                                                                                 30
     relocations over the next few years. While losses will be                                     years including Baker & McKinsey to the West Loop and
     sharper in other submarkets, the East Loop will be slower                                     Blue Cross 25 Blue Shield into its expanding namesake tower
     to recover due to its isolation from the main commuter rail                                   along the northern edge of Grant Park. Rents will soften and
                                                                                                                 20
     lines. Watch for vacancy rates to rise early in 2009 with                                     concessions will expand as landlords compete with other
                                                                                                                 15
     the departure of the law firm Kirkland & Ellis from AON                                       areas of the10 downtown market.
                                                                                                                      5
                                                                                                                      0
   Major East Loop Lease Transactions                                                                                       1Q05      2Q05       3Q05        4Q05       1Q06

   Tenant                                                                 Address                                                         Size (SF)            Comments
   PSA-Dewberry                                                           33 S. State St.                                                  11,000              New Lease




   Major East Loop Sale Transactions
   Address                           Size (SF)                       Price (mil)      Price PSF         Buyer                                       Seller
   none


Pictured above:
AON Center, the law firm Kirkland & Ellis will be vacating over
400,000 SF in coming quarters.
                                                                                                                                                                                              12
                                                                                                                                 NAI Hiffman Year End 2008 Market Report
Office | North Michigan Avenue

    Statistics                                                                                       North Michigan Ave Office Market
    Market Size ........................................................ 13,946,774                                        1.0m                                                          25%
    Overall Vacant Space (SF)..................................... 1,338,931
                                                                                                                           750k                                                          20%
    Overall Vacancy .......................................................... 9.60%
                                                                                                                           500k
    Sublease Vacancy ...................................................... 0.33%                         Vacancy                                                                        15%
                                                                                                          in percent       250k
    4Q08 Absorption (SF) ...............................................(38,259)
                                                                                                                                                                                         10%
    2008 Absorption (SF) ............................................... 187,673                                             0
                                                                                                          Absorption
    Gross Direct Rental Rate (PSF) .................................. $31.73                              in SF      -250k                                                                5%
    4Q08 Construction Completions (SF).................................. 0
                                                                                                                           -500k                                                         0
    Under Construction (SF) ..................................................... 0                                                 4Q07       1Q08       2Q08       3Q08       4Q08

                                                                                  10.0
  MARKET OVERVIEW                                          7.5
  North Michigan Avenue continues to have the lowest overall                                        North Michigan Ave Weighted Rents
                                                           5.0
  vacancy rate among downtown Chicago office submarkets.                                            in gross $ per SF per year
                                                                                                                                                                                       31.73
                                                                                                                                                                            30.55
                                                            to
  Vacancy increased slightly in the area this quarter due 2.5                                                                                                    26.66
                                                                                                                                        26.16         26.15
  negative absorption in Class A and Class B properties.   0.0
  The overall vacancy rate rose from 9.33% in September
  to 9.60% currently, still down from year end 2007’s rate-2.5

  of 10.95%. Class A vacancy rose this quarter, increasing-5.0
                                                                                             1Q05      2Q05       3Q05           4Q05      1Q06
  from 10.33% to 10.77% as a result of light leasing activity.
                                                           10.0
  Class B vacancy also increased slightly, rising from 8.50%
  to 8.66% over the quarter.                                7.5
                                                                                                                                        2004      2005           2006       2007       2008
                                                                                       5.0
  MARKET OUTLOOK
  The immediate outlook for North Michigan Avenue is little   2.5
                                                                                                                    35
  changed from previous quarters. The departure of the law    0.0
                                                                                                                    30
  firm Jenner & Block from roughly 300,000 square feet at
                                                             -2.5
  330 N. Wabash for its new home in neighboring River North                                                 25
                                                                                                 edge up only slightly. While concessions have never been as
                                                               is
  will not occur until late in the year. Also, Spencer Stuart-5.0                                            as
                                                                                             1Q05robust here3Q05in the Loop1Q06
                                                                                                     2Q05   20       4Q05    submarkets, landlords may begin
                                                                                                                                      1Q05   2Q05   3Q05   4Q05                                1Q0
  not scheduled to vacate its 100,000 square feet at 401 N.                                      to turn more frequently to them as the economy continues
                                                                                                            15
  Michigan until early 2010. Until then look for vacancy to                                      to weaken. 10
                                                                                                                       5
Major North Michigan Avenue Lease Transactions                                                                         0
                                                                                                                             1Q05       2Q05      3Q05        4Q05        1Q06
Tenant                                                                 Address                                                   Size (SF)              Comments
none




Major North Michigan Avenue Sale Transactions
Address                           Size (SF)   Price (mil)                          Price PSF            Buyer                                                    Seller
none



                                                                                                                                                                   Pictured above:
                                                                                                                       330 N. Wabash Ave., where Jenner & Block will vacate roughly
                                                                                                                                                             300,000 SF this year.
   Office | River North

       Statistics                                                                                River North Office Market
       Market Size ........................................................ 11,120,383                                 1.0m                                                       25%
       Overall Vacant Space (SF)..................................... 1,176,564
                                                                                                                       750k                                                       20%
       Overall Vacancy ........................................................ 10.58%
                                                                                                                       500k
       Sublease Vacancy ...................................................... 3.12%                  Vacancy                                                                     15%
                                                                                                      in percent       250k
       4Q08 Absorption (SF) ...............................................(30,157)
                                                                                                                                                                                  10%
       2008 Absorption (SF) ..............................................(101,186)                                     0
                                                                                                      Absorption
       Gross Direct Rental Rate (PSF) .................................. $25.49                       in SF      -250k                                                            5%

       4Q08 Construction Completions (SF).................................. 0                                       -500k                                                         0
                                                                                                                               4Q07       1Q08       2Q08      3Q08      4Q08
       Under Construction (SF) ....................................... 2,523,643


     MARKET OVERVIEW
     Vacancy rose at the end of the year in the River North                                      River North Weighted Rents
                                                                    10.0
     submarket, as the area prepares for the delivery of two                                     in gross $ per SF per year
                                                                                                                                                                                25.49
     major skyscrapers in 2009. The overall vacancy rate rose7.5                                                                                 22.80      23.16     24.21
     from 10.31% in September to 10.58% in December, up5.0                                                                            19.72
     from 9.67% last year at this time. In the relatively small Class
     A market, vacancy rose from 3.69% in September to 9.37%2.5
     at year end, up from 2.38% last December. Class B vacancy0.0
     decreased this quarter, moving from 12.45% in September        -2.5
     to 12.17% in December, further down from 13.31% at this
     time last year.                                                -5.0
                                                                                           1Q05        2Q05        3Q05         4Q05    1Q06             1Q05   2Q05   3Q05   4Q05           1
                                                                                                                                    2004     2005          2006   2007   2008
     MARKET OUTLOOK
     While a weakening economy will impact the submarket’s                                                       30
     advertising and marketing base, River North should see                                  economy continues to decelerate, vacancy could rise in the
     some remarkable absorption in 2009 with two skyscrapers                                 area, especially with the departure of the Bank of America
                                                                                                          25
     opening along the River. Pre-leasing has been fairly firm,                              back office 20space from 350 N. Orleans this summer. Look
     but this quarter saw the first sublease listings in Hines’ 300                          for rents to stabilize and concessions to grow as River North
                                                                                                          15
     N. LaSalle project from Elite Business Centers and the real                             landlords compete with more centrally located properties
     estate investment firm Stockbridge Capital Partners. As the                             across the river.
                                                                                                          10

                                                                                                                   5

  Major River North Lease Transactions                                                                             0
                                                                                                                        1Q05       2Q05       3Q05         4Q05     1Q06
  Tenant                                                                 Address                                            Size (SF)             Comments
  AT&T Corp.                                                             350 N. Orleans St.                                   171,400             Renewal
  Fiserv Inc.                                                            350 N. Orleans St.                                    85,000             Renewal
  Manning Selvage & Lee Inc.                                             Merchandise Mart                                      53,463             New Lease
  VSA Partners Inc                                                       600 W. Chicago Ave.                                   40,000             New Lease




  Major River North Sale Transactions
  Address                             Size (SF)                     Price (mil)      Price PSF       Buyer                                        Seller
  none

Pictured above:
350 N. Orleans, where AT&T and Fiserv renewed leases this quarter.


                                                                                                                                                                                        14
                                                                                                                              NAI Hiffman Year End 2008 Market Report
Office | North Suburban

    Statistics                                                                            North Suburban Office Market
    Market Size ........................................................ 28,834,865                             1.0m                                                          25%
    Overall Vacant Space (SF)..................................... 4,994,777
                                                                                                                750k                                                          20%
    Overall Vacancy ........................................................ 17.32%
                                                                                                                500k
    Sublease Vacancy ...................................................... 3.97%              Vacancy                                                                        15%
                                                                                               in percent       250k
    4Q08 Absorption (SF) .............................................(598,243)
                                                                                                                                                                              10%
    2008 Absorption (SF) ..............................................(125,056)                                  0
                                                                                               Absorption
    Gross Direct Rental Rate (PSF) .................................. $23.88                   in SF      -250k                                                                5%

    4Q08 Construction Completions (SF).................................. 0                                                                                          -598K
                                                                                                                -500k                                                         0
                                                                                                                         4Q07       1Q07       2Q08       3Q08       4Q08
    Under Construction (SF) ..................................................... 0


  MARKET OVERVIEW
  The North Suburban office market finished the year with
                                                       10.0                              North Suburban Weighted Rents
  another quarter of negative absorption as Hewitt Associates                            in gross $ per SF per year
                                                        7.5
  placed an large block of sublease space at Three Overlook
  Point in Lincolnshire on the market. The overall vacancy
                                                        5.0                                                                                                      23.29      23.88
                                                                                                                                21.57      21.94      22.16
  rate therefore increased from 15.25% in September to  2.5
  17.32% in December, up from 14.90% last year at this
  time. Class A vacancy likewise increased, moving 0.0   from
  16.55% in September to 20.33% currently with the new -2.5
  Hewitt sublease space. Class B vacancy actually fell during
                                                       -5.0
  the fourth quarter, dropping from 14.89% in September to   1Q05                       2Q05       3Q05          4Q05      1Q06             1Q05       2Q05      3Q05       4Q05    1Q06

  14.80% at year end.                                                                                                       2004        2005          2006       2007       2008


  MARKET OUTLOOK                                                                                         35
  The outlook for the North Suburban office market, while                               and concessions to grow as landlords chase the few active
                                                                                                   30
  not as dire as some other areas, remains gloomy. Leasing                              tenants. One such tenant is Astellas, the U.S. branch of a
  activity has slowed dramatically. Additionally, several large                         Japanese pharmaceutical company, which is considering a
                                                                                                   25
  block of space - either from new construction or from                                 move to Glenview from Parkway North in Deerfield, where
                                                                                                   20
  sublease listings - remain vacant and more threaten to come                           it leases about 280,000 square feet. Parkway North has
                                                                                                   15
  on the market. In 2009, look for vacancy rates to increase                            countered with a proposed build-to-suit for the firm.
                                                                                                   10
                                                                                                            5
Major North Suburban Lease Transactions                                                                     0
                                                                                                                  1Q05      2Q05        3Q05        4Q05      1Q06
Tenant                                                                Address                                                   Size (SF)              Comments
FedEx                                                                 1100 W. Lake Cook Rd., Buffalo Grove                          28,534             Renewal
College of American Pathologists                                      500 Lake Cook Rd., Deerfield                                 18,419              New Lease




Major North Suburban Sale Transactions
Address                                                    Size (SF) Price (mil) Price PSF         Buyer                                   Seller
none



                                                                                                                                                         Pictured above:
                                                                                               3 Overlook Point, Lincolnshire, Hewitt Associates’ latest sublease listing.
  Office | Northwest Suburban

       Statistics                                                                                 Northwest Suburban Office Market
       Market Size ........................................................ 32,203,411                                   1.0m                                                         25%
       Overall Vacant Space (SF)..................................... 7,370,878
                                                                                                                         750k                                                         20%
       Overall Vacancy ........................................................ 22.89%
                                                                                                                         500k
       Sublease Vacancy ...................................................... 3.22%                    Vacancy                                                                       15%
                                                                                                        in percent       250k
       4Q08 Absorption (SF) ...............................................(21,996)
                                                                                                                                                                                      10%
       2008 Absorption (SF) ..............................................(218,673)                                        0
                                                                                                        Absorption
       Gross Direct Rental Rate (PSF) .................................. $20.93                         in SF      -250k                                                               5%

       4Q08 Construction Completions (SF)......................... 35,005                                                -500k                                                        0
                                                                                                                                  4Q07       1Q08       2Q08       3Q08      4Q08
       Under Construction (SF) ..................................................... 0


     MARKET OVERVIEW
     The Northwest Suburban office market ended 2008 with  10.0                                  Northwest Suburban Weighted Rents
     another quarter of negative absorption. The overall vacancy                                 in gross $ per SF per year
                                                             7.5
     rate moved from 22.74% in September to 22.89% in
     December, up from 21.89% last year at this time. Direct 5.0
                                                                                                                                         21.48                            21.41     20.93
     vacancy has risen less dramatically, but still stands at2.5
                                                                                                                                                    20.72      20.72

     19.67% at the end of the year. Sublease vacancy rates in
                                                             0.0
     the area are up by almost 20 percent in the last year due to
     fallout from area mortgage, transportation and financial firm
                                                            -2.5
     downsizing. Class A overall vacancy now stands at 26.61%,
                                                            -5.0
     up from 25.70% last quarter and 24.71% a year ago. Class     1Q05                           2Q05      3Q05           4Q05      1Q06             1Q05       2Q05      3Q05      4Q05     1Q06

     B vacancy also weakened, rising from 19.72% at year end                                                                         2004        2005          2006       2007      2008
     2007 to 20.37% currently.
                                                                                                                 35
     MARKET OUTLOOK
                                                                                                                 30
     Vacancy in the Northwest Suburban office market will                                    also scaling back. HSBC North America Holdings Inc. has
     continue to increase in 2009 on weakening demand.                                       cancelled plans for a new 300,000-square-foot build-to-suit
                                                                                                          25
     Adding to the area’s sublease challenges, Zurich Financial                                            consolidate regional offices. Look for vacancy
                                                                                             in Itasca to 20
     Services is expected to list a new 225,000-square-foot                                  rates to continue to rise as the fallout from the recession
                                                                                                          15
     block of space at its namesake towers on American Lane                                  worsens. 10
     in Schaumburg. Other financial players in the area are
                                                                                                                     5

  Major Northwest Suburban Lease Transactions                                                                        0                                       denotes 1Q06
                                                                                                                                                     italics 4Q05 NAI Hiffman transaction
                                                                                                                           1Q05      2Q05        3Q05
  Tenant                                                                 Address                                                         Size (SF)              Comments
  Comcast Corp.                                                          1500 McConnor Pky, Schaumburg                                    135,000               Extension
  Harley Davidson Financial Services                                     1701 Golf Rd., Rolling Meadows                                    71,046               Sublease
  Heart Financial Services                                               1600 McConnor Pky., Schaumburg                                    56,000               Sublease
  Acresso Software                                                       1000 E. Woodfield Rd., Schaumburg                                 51,758               Sublease
  Siemens Enterprise Communications                                      2300 N. Barrington Rd., Hoffman Estates                           14,948               New Lease
  WMS Gaming                                                             500 Park Blvd., Itasca                                            12,000               New Lease
  Tango Networks                                                         333 Pierce Rd., Itasca                                            11,581               New Lease

  Major Northwest Suburban Sale Transactions
  Address                                          Size (SF)        Price (mil)      Price PSF       Buyer                                       Seller
  1699 E. Woodfield Rd., Schaumburg                 107,852              $14.65          $136        K&K Holdings                                Premises Group

Pictured above:
Windy Point I, Schaumburg, where Comcast extended its lease this quarter.


                                                                                                                                                                                            16
                                                                                                                                 NAI Hiffman Year End 2008 Market Report
Office | O’Hare Area

    Statistics                                                                                 O’Hare Area Office Market
    Market Size ........................................................ 14,880,848                                 1.0m                                                         25%
    Overall Vacant Space (SF)..................................... 3,529,185
                                                                                                                    750k                                                         20%
    Overall Vacancy ........................................................ 23.72%
                                                                                                                    500k
    Sublease Vacancy ...................................................... 1.81%                    Vacancy                                                                     15%
                                                                                                     in percent     250k
    4Q08 Absorption (SF) ...............................................(69,675)
                                                                                                                                                                                 10%
    2008 Absorption (SF) ..............................................(307,474)                                      0
                                                                                                     Absorption
    Gross Direct Rental Rate (PSF) .................................. $22.29                         in SF      -250k                                                             5%

    4Q08 Construction Completions (SF)....................... 140,156                                               -500k                                                        0
                                                                                                                             3Q07     4Q07       1Q08        2Q08       3Q08
    Under Construction (SF) ..................................................... 0


  MARKET OVERVIEW
  Vacancy increased dramatically during the 10.0        fourth                                O’Hare Area Weighted Rents
  quarter on the delivery of Duke Realty’s as-yet-unleased                                    in gross $ per SF per year
                                                         7.5
  140,000-square-foot Rosemont Crossings project. Overall
  vacancy rose from 22.51% in September to 23.72% in     5.0
                                                                                                                                                                    22.37      22.29
                                                                                                                                21.33        21.66      21.51
  December, up from 20.92% last year at this time. Direct2.5
  vacancy now stands at 21.90%. Over the year, Class A
                                                         0.0
  vacancy has risen from 18.80% to 23.60% while Class B
  vacancy has increased from 25.92% to 26.39%. While still
                                                        -2.5
  below 2007 levels, sublease listings increased by 12 percent
                                                        -5.0
  in the fourth quarter and now make up 1.81% of vacancy. 1Q05                                2Q05       3Q05        4Q05      1Q06           1Q05       2Q05        3Q05       4Q05   1Q06
                                                                                                                                2004      2005        2006      2007           2008
  MARKET OUTLOOK
  A low level of leasing activity and an expansion of sublease                                                35
  listings reflect a sluggish submarket at the end of 2008.
                                                                                                              30
  Vacancy will continue to increase in 2009 as tenants
  retrench and give back space in the face of a worsening                                 development by a joint venture of the Harp Group and Ryan
                                                                                                      25
  recession. While a positive sign towards the long term                                               will
                                                                                          Companies20 negatively impact the area in 2010 as the
  tenant opinion of the market, Cisco System’s contract to                                firm will vacate space in nearby O’Hare Plaza adding to
                                                                                                      15
  lease two-thirds of a planned 121,000-square-foot new                                   O’Hare’s sublease woes.
                                                                                                      10
                                                                                                                5
Major O’Hare Area Lease Transactions                                                                            0
                                                                                                                      1Q05     2Q05       3Q05        4Q05      1Q06
Tenant                                                                Address                                                       Size (SF)            Comments
Cisco Systems                                                         Balmoral & River Rd., Chicago                                   81,000             Pre-Lease
FastCAM Inc                                                           8700 W. Bryn Mawr Ave., Chicago                                  9,000             New Lease
Dairy Management, Inc.                                                10255 W. Higgins Rd., Rosemont                                   5,896             New Lease




Major O’Hare Area Sale Transactions
Address                                         Size (SF)        Price (mil)      Price PSF       Buyer                                      Seller
none

                                                                                                                                                         Pictured above:
                                                                                                         Rosemont Crossing I, Rosemont, Duke Realty’s recently completed
                                                                                                                                                     140,000 SF project.
  Office | East-West Corridor

       Statistics                                                                                East-West Corridor Office Market
       Market Size ........................................................ 42,005,405
                                                                                                                       1.0m                                                       25%
       Overall Vacant Space (SF)..................................... 8,746,439
                                                                                                                       750k                                                       20%
       Overall Vacancy ........................................................ 20.82%
                                                                                                                       500k
       Sublease Vacancy ...................................................... 2.76%                  Vacancy                                                                     15%
                                                                                                      in percent       250k
       4Q08 Absorption (SF) .................................................. 3,786
                                                                                                                                                                                  10%
       2008 Absorption (SF) ..............................................(174,576)                                     0
                                                                                                      Absorption
       Gross Direct Rental Rate (PSF) .................................. $21.76                       in SF      -250k                                                            5%
       4Q08 Construction Completions (SF)....................... 117,996
                                                                                                                   -500k                                                          0
       Under Construction (SF) ..................................................... 0                                        3Q07       4Q07       1Q08      2Q08      3Q08



     MARKET OVERVIEW
     Vacancy rates edged up at the end of 2008 in the East-                                      East-West Corridor Weighted Rents
     West Corridor as the regional economy continued to slow.                                    in gross $ per SF per year

     Overall vacancy rose from 20.61% in September to 20.82%
     in December, up from 19.49% at the end of 2007. Most
                                                                                                                                                                     21.43      21.76
     of the increase is found in Class A properties due to new                                                                       20.59      20.63      20.86

     speculative construction that has yet to secure tenants
     and downsizing by existing users such as Daimler Truck
     Financial. Over the year, Class A vacancy rose from 16.96%
                                                          10.0
     to 20.36%. The rise has been steepest in the eastern half
     of the Corridor, where vacancy has risen from 16.35% in
                                                           7.5
     December 2007 to 20.01% currently.                                                                                              2004       2005       2006      2007       2008
                                                           5.0

     MARKET OUTLOOK                                         2.5
                                                                                                                 35
     Further consolidation is expected in the market in 2009 from
                                                            0.0                              North is reportedly in discussions to lease 150,000 square
                                                                                                          30
     such tenants as BP and JP Morgan Chase which should raise                               feet of the 250,000-square-foot building, a 200,000-square-
                                                           -2.5
     the vacancy rate even further in both halves of the Corridor.                           foot block of space also remains on the market in Lombard
                                                                                                          25
     While new construction has all but halted in the market,
                                                           -5.0
                                                                1Q05                                  W. 20 4Q05
                                                                                             at 747 3Q0522nd Street. Sublease listings are beginning to
                                                                                             2Q05                    1Q06      1Q05    2Q05     3Q05 4Q05                                    1Q06
     several new speculative properties remain almost fully                                  rise which will drive down effective rental rates.
                                                                                                          15
     vacant several months after completion. Although Highland                                                   10
                                                                                                                   5
  Major East-West Corridor Lease Transactions                                                                      0                               italics denotes NAI Hiffman transaction
                                                                                                                         1Q05     2Q05       3Q05        4Q05       1Q06
  Tenant                                                                 Address                                                     Size (SF)              Comments
  Navistar                                                               3333 S. Finley, Downers Grove                                  47,000              Expansion
  The Parker Group                                                       2400 Cabot Dr., Lisle                                          43,756              New Lease
  IPSCO, Inc                                                             2650 Warrenville Rd., Downers Grove                            28,293              New Lease
  Veolia Transportation                                                  720 Butterfield Rd., Lombard                                   23,812              New Lease
  Merrill Lynch & Co.                                                    2021 Spring Rd., Oak Brook                                     23,416              New Lease
  LGS Innovations                                                        1600 Eisenhower Ln, Lisle                                      21,831              New Lease
  RSA Medical, Inc.                                                      1255 Bond St., Naperville                                      20,531              New Lease
  JDA                                                                    1717 Park St., Naperville                                      16,544              New Lease
  Major East-West Corridor Sale Transactions
  Address                                          Size (SF)        Price (mil)      Price PSF       Buyer                                      Seller
  none

Pictured above:
1600 Eisenhower Ln., Lisle, where LGS Innovations leased
almost 22,000 SF.

                                                                                                                                                                                         18
                                                                                                                              NAI Hiffman Year End 2008 Market Report
Office | I-55 Corridor

    Statistics                                                                                      I-55 Corridor Office Market
    Market Size .......................................................... 3,979,695
                                                                                                                           100k                                                        25%
    Overall Vacant Space (SF)........................................ 495,903
                                                                                                                            75k                                                        20%
    Overall Vacancy ........................................................ 12.46%
                                                                                                                            50k
    Sublease Vacancy ...................................................... 0.40%                         Vacancy                                                                      15%
                                                                                                          in percent        25k
    4Q08 Absorption (SF) .................................................. 5,682
                                                                                                                                                                                       10%
    2008 Absorption (SF) ................................................. 85,663                                           0
                                                                                                          Absorption
    Gross Direct Rental Rate (PSF) .................................. $19.74                              in SF      -25k                                                               5%
    4Q08 Construction Completions (SF).................................. 0
                                                                                                                           -50k                                                        0
    Under Construction (SF) .......................................... 104,000                                                     4Q07      1Q07       2Q08       3Q08       4Q08



  MARKET OVERVIEW
  During 2008, vacancy in the I-55 Corridor bucked the                                             I-55 Corridor Weighted Rents
  general suburban trend, falling over the course of the year as                                   in gross $ per SF per year

  tenants discovered the area’s locational advantages. Overall
  vacancy fell from 14.55% at the end of 2007 to just 12.46%
  currently. Much of the improvement in this submarket can                                                                            20.59         19.47      19.23      19.99      19.74
  be attributed to activity at the sprawling Class B Tallgrass
  Corporate Center, where vacancy moved from over 30
  percent to under 20 percent by the end of 2008. Class A  10.0
  vacancy actually rose slightly over the year, from 11.30% 7.5
  to 12.46%, reflecting broader suburban trends. Sublease
  listings still are not a major factor in this submarket. 5.0                                                                        2004       2005          2006       2007       2008

                                                                                2.5
  MARKET OUTLOOK                                                                                                   35
                                                          0.0
  Outside of Tallgrass, leasing continues to be dominated by
                                                                                                                   30
                                                          see
  small to medium-sized tenants. While the Corridor will -2.5 a
                                                          base
  slowdown in leasing in 2009, its locally-focused tenant-5.0                                             25
                                                              1Q05                                    3Q05
                                                                                                   2Q05        4Q05   1Q06       1Q05    2Q05                             3Q05       4Q05    1Q06
  should keep it from suffering as much as other suburban                                                  affordable alternative to parts of
                                                                                               remains an 20                                the East-West
  submarkets. Most new construction is on hold in the area                                     Corridor and should continue to attract tenants based on
                                                                                                           15
  as developers wait for demand to return. The I-55 Corridor                                   value and its transporation and location advantages.
                                                                                                           10
                                                                                                                       5
Major I-55 Corridor Lease Transactions                                                                                 0
                                                                                                                            1Q05      2Q05      3Q05        4Q05       1Q06
Tenant                                                                 Address                                                            Size (SF)             Comments
Codilis & Assoc.                                                       535 Plainfield Rd., Willowbrook                                      12,537              New Lease
Poly 1                                                                 1261-1295 Windham Pky., Romeoville                                   12,360              New Lease




Major I-55 Corridor Sale Transactions
Address                                          Size (SF)        Price (mil)          Price PSF       Buyer                                     Seller
none


                                                                                                                                                                     Pictured above:
                                                                                                                                            italics denotes NAI Hiffman transaction
                                                                                                            535 Plainfield, Willowbrook, where Codilis & Associates leased space
                                                                                                                                                                         this quarter.
Office | Methodology/Map

The information included in this report is the result of a compilation of information on Class A, Class B and Class C office properties
located in the Metropolitan Chicago area. NAI Hiffman obtained the information from property representatives, CoStar Group and
other sources. NAI Hiffman greatly appreciates the participation of each of these individuals and companies, without whose help
this report would not have been possible.

All the information gathered is databased and continues to be updated every three months. From this database total inventory,
vacancy, rental rate and absorption figures may be calculated and presented. Total inventory may change from year to year as
a result of new construction or newly renovated buildings, conversion, sale, or recently remeasured properties. The database is
thoroughly checked and balanced from year to year.

DEFINITIONS
The NAI Hiffman Office Market Report tracks several basic measures of market conditions. This information is collected for
individual buildings and then consolidated into submarket and market totals.

Construction Completions measures office                                                                                                                                                                                              WISCONSIN

properties newly delivered to market and added to
                                                                                                                                                                                                                                      ILLINOIS




the database. Generally excluded are government                                                                                                                                                                                         Far
facilities and owner-occupied build-to-suits.                                                                                                                                                                                           North
                                                                                                                                                                               Round Lake
                                                                                  31                                                                                             Beach                                         94
                                                                                                                                                          12                                                                        Gurnee
                                                                                                                                                                                                               45                            Waukegan
                                                                      120

Market Size includes the total square footage of
                                                                                                                                                          59                                                                              41
                                                                McHenry
                                                                                                                                                                                                                                              North
                                                                                                                                                                                           120                 Grayslake                      Chicago
                                                                                                                                                                60
rentable space, vacant and occupied, in the market.          Far                                                                                                                                                                                  43

                                                             Northwest
Inventory includes all multi-tenant and non-owner                           31
                                                                                                                                                                                                                           Libertyville

occupied buildings over 10,000 square feet.
                                                                                                                                                                                                                                              176
                                                                                                                                                                                        176
                                                                176
                                                                                                                                                                    Wauconda                                              Central North
                                                                                                                                         MC HENRY CO.




                                                               Crystal Lake
                                                                                                                                                                                                                                                   60
                                                                                                                                           LAKE CO.




                                                                     14                                                                                                                                                        21
Net Absorption measures the net change in
                                                                                                                                                               59
                                                                                                  Cary                                                               Central                                             45                       94
                                                                                                                                                                                                                                                               41

                                                                                                                                                                     Northwest                                                  Lincolnshire

occupied space over a period of time for a particular
                                                                                                                                                                                                                83
                                                                                                                                                                                                                                                                        Highland
                                                                                                                                                                                  12
                                                                                                                                                                                                                                                              43           Park                                               Lake Michigan
market or submarket.                                                Algonquin
                                                                                                                                                        Barrington             LAKE CO.
                                                                                                                                                                               COOK CO.
                                                                                                                                                                                                                          Buffalo
                                                                                                                                                                                                                          Grove                             Deerfield
                                                                                               COOK CO.
                                                                                               KANE CO.




                                                                                                                                                                                                                                 Wheeling     Northbrook
                                                                                                                                         Barrington                               14                                           83
                                                                                                                                                                                                                                                                                              94
Overall Vacancy measures unoccupied office
                                                                                                                                                                                                                                          294
                                                                                                                                         Hills                                             Palatine 53
                                                               Carpentersville                                                              59                                                                                                                                           43
                                                                                                                                                   62

space, both direct and sublease, as a percentage
                                                                                                                                                                                                           Arlington
                                                                                                                                                                                                           Heights                                           Glenview
                                                                                                                                                                                                                                              45                                                                        Wilmette
                                                                                                                                                            Hoffman               Schaumburg
of the total market.
                                                                                                                              90                            Estates
                                                                                                                                                                   72             Area                                              14 12                       Near North Cook
                                                                                                                                                                                                                           58                                                                            41
                                                                Elgin                                                                                                                                           90           83 Des Plaines
                                                                                                                                                                         Schaumburg
                                                                                                                                                                                                                                                  12                                Niles             Skokie


Sublease Vacancy measures unoccupied office
                                                                                                                                                                                                                                                  45                                          14                                  Evanston
                                                                                                                                                                                                  290 Elk Grove
                                                                                                                                                         Hanover         in-O'                                                                    Rosemont
                                                                                                                                                                      Elg      H ar
                                                                                                                                                                                    e Expressw            Village                                               Park
                                                                                          COOK CO.                                                         Park                                  ay
                                                                                                                                                                                                                                   O'Hare
                                                                                                                                                                                                                                                                Ridge
space being marketed for sublet as a percentage of                                       DUPAGE CO.                                                                                                                             International                                                                                            14
                                                                      31     25                                                      Barlett                                                                                        Airport
                                                                                                                                                                                                                                                                                                         94
                                                                                                                                                                        20     Roselle
                                                                                                                                                                                                      Itasca                                190
                                                                                                                                                                                                                                                            O'Hare                                                                                                    41


the total market.                                                                                                                                                                                                                                           Area
                                                                                                                                                                                               53           19
                                                                                                                                                                                                           Wood Dale
                                                                                                                                                                      Bloomingdale
                                                                                                                                                                                                                                DUPAGE CO.
                                                                                                                                                                                                                                 COOK CO.




                                                                                                                                                                                                                                                       Franklin
                                                                                                                                    59                              North DuPage                                                             294         Park
                                                                                                   Proposed Fox Valley Expressway




                                                                                                                                                                                                                 290                                                                                                               90
                                                                                                                                                                             Glendale                                                                                                                                                     94
                                                                                                                                                        Carol Stream         Heights                  Addison                                                                      Elmwood
                                                                        St. Charles                                                                                                                                  83                Northlake
Under Construction measures buildings that have
                                                                                                                                                                                                                                                                                   Park
                                                                                                                                                                         64                                                                                                                         64
                                                                                                                                                                                               53                      Elmhurst              20
                                                                                                                                                                                                                                                                              Oak Park
                                                                                                                                                                                                                                                  12

begun development to a substantial degree.
                                                                                                                                                                                                                                                                                                      50
                                                                                                                                                                                                  Lombard                                         45        Maywood
                                                                                                                                                                                                                                                                                             290
                                                                                                                                                            Wheaton                                                                     38
                                                                                                                                                                          38
                                                                                                                                             Western                                                                88
                                                                                                                                                                                                                                                                                    Berwyn
                                                                   25
                                                                                                                                             East-West                                                                                                                              43                                                                        55
Weighted Asking Gross Rents provide the average               31                                                                                                               56                                    Oak Brook
                                                                                                                                             Corridor                                                          Eastern                                                             34
                                                                                                                                                                                                               East-West                               12                                                                 Chicago                                                90                         Lake Michigan
rental rate being quoted for properties in the market.                                                       88                                                              Lisle      34 Downers
                                                                                                                                                                                            Grove              Corridor
                                                                                                                                                                                                                    Westmont
                                                                                                                                                                                                                                                       20      171
                                                                                                                                                                                                                                                                                         Chicago
                                                                                                                                                                                                                                                                                         Midway
                                                                                                                                                                                                                                                                                                    Oak Street
                                                                                                                                                                                                                                                                                                                                                                                 94                      41


These averages are weighted by total square
                                                                                                                                                                                  53                                                                                                     Airport
                                                                                                                                                                                                                        83 Burr
                                                                                                                                                                                                                                                                                                                                                                               Michigan Avenue




                                                                                                                                    59                                                                                                                                    171
                                                                        Aurora                                                                     Naperville
                                                                                                                                                                                         355                               Ridge
                                                                                                                                                                                                                                                                                                    Chicago Avenue

footage vacant per property class with a given                                                                                                                                         Woodridge
                                                                                                                                                                                                           Willowbrook                            294                                                                                                                                              90
                                                                                                                                                                                                                                                                                                                                                       State Street




                                                                                                                                                                                                          Darien                                                                                               RIVER                                                                             NORTH

submarket to obtain a total submarket average.
                                                                                                           DUPAGE CO.
                                                                                                            WILL CO.                                                                                      55                                                                            43     12              NORTH                                                                             MICHIGAN
                                                                                                                                                                                                                                                                                                                                                                                                      12
                                                               30
                                                                                                                                                                                                                                                                                               20                                                                                                AVENUE
                                                                                                                                                                                                                                                                                                                                                                                                      20
                                                                                                                                                                         Bolingbrook                                                                                                Kinzie Oak
Office rents are presented on a weighted gross, or
                                                                34                                                                                                                                                                                              90
                                                                                                                                                          I-55 Corridor                                                                                                    94                      Lawn

                                                                                                                                                                                                                                                                                                         50                                               57
full service, basis. We caution the reader against
                                                                                                                                                                                                                         171                                                       83                                                                                                       94
                                                                                                                                                                                                                                                                                                                                                                                          EAST LOOP
                                                                                                                                                                                                      Lemont
                                                                                                                                                                                                                                                                                                                                        CENTRAL LOOP


                                                                                                                                                                                                                                                                                                                                                                        Michigan Avenue
                                                                                 KENDALL CO.




                                                                                                                                                                      Romeoville                                                                         45
                                                                                   WILL CO.




accepting this rate as an exact measure of effective
                                                                                                                                                                                                                                                                                                                         Wells Street
                                                                                                                                                                                                                                                                                                         Wacker Drive




                                                                                                                                                                                                                                                                                                                                                   State Street




                                                                                                                                                                                                                       COOK CO.
                                                                                                                                                                                                                                                                                        WEST
                                                                                                                                                                                                                                                                  Halsted Street




                                                                                                                                                                                                                       WILL CO.                                                                                                                                                                  Grant
                                                                                                             30
                                                                                                                                                                                                                                                                                        LOOP                                                                                                     Park

rental rates. However, we believe that average
                                                                                                                                                                                           171
                                                                                                                                                                                                                                                                                                                                                                                                     Lake Shore Drive




                                                                                                                                                                             53
                                                                                                                                                                                                                                                                                                                                                          Harvey


quoted rates are useful in generalizing rental rate
                                                                                                                                                                                                                                                                                                                                                                                                                        6
                                                                                                                                                                                                                                                                  290
                                                                                                                                                                                                                                                                                                                                                                      294       80
trends when observed over a period of time.
                                                                                                                                                                                                                                                              Downtown Office Submarkets




                                                                                                                                                                                                                                                                                                                                                                                                                            20
                                                                                                                                                                                                        NAI Hiffman Year End 2008 Market Report
Industrial Market | Year End 2008

MARKET OVERVIEW                                                        Industrial Submarket Availability
                                                                       in percent
Chicago is the third largest city and metropolitan area in the U.S.
and ranks as the second largest industrial market with over one             4th Quarter 2008
                                                                            3rd Quarter 2008                                                                             21.19
billion square feet of inventory. The Chicago industrial market
remains the most influential in the Midwest due to its growing
                                                                                                                                                     14.61
prominence as an inland port and its diverse labor pool.                                12.83                   12.66        12.69                               13.22
                                                                                                                                         10.44
                                                                                                     8.94
Chicago’s strategic location and unparalleled transportation
infrastructure make it the most important transportation center
in the country. Located in the path of three of the nation’s busiest
transcontinental expressways (I-80, I-90 and I-94), Chicago                             Lake        SE O’Hare CDP                        I-88        I-55    I-80E       I-80E
                                                                                                   Wisco
also claims 70% of the nation’s rail and intermodal activity.
Furthermore, O’Hare International Airport remains one of the           Industrial Vacancy and Absorption
world’s busiest airports, while the Great Lakes canal system
accommodates vital barge and shipping traffic.                          15MM                                                                                               16%


                                                                        10MM
The Chicago area has the second largest workforce in the                                                                                                                   12%
country and is the largest manufacturing market. The MSA                 5MM
population is projected to grow to over 10 million by 2025.
                                                                             0                                                                                             8%
2008 IN REVIEW
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                                                                        -5MM
The current economic climate had adverse effects on the                                                                                                                    4%
Chicago industrial market during 2008. Many companies                  -10MM
                                                                                                Vacancy Rate (%)
                                                                                                Net Absorption (sf)
remain in a “wait and see” holding pattern with regards to




                                                                                                                                                                  08
their real estate decisions as the situation continues to unfold.




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                                                                       -15MM                                                                                               0%




                                                                                                                                                             Q
The Chicago industrial market ended 2008 with an overall
vacancy rate of nearly 12%, up 189 basis points from 2007.             2009 OUTLOOK
Net absorption totalled negative 2.58 million sqare feet for 2008,     Vacancy will continue to increase moving into 2009 as
with much of that negative absorption ocurring during the final        businesses continue to contract due to the ongoing
quarter of the year, in tandem with the dramatic worsening of the      economic situation. Absorption rates should trend more
economic situation and the announcement of layoffs worldwide.          positive as construction has largely stopped and much of
                                                                       the vacant space throughout the market is absorbed.
While leasing activity has been primarily limited to smaller
spaces and shorter leases, activity continues as tenants look          Leasing will likely remain active as companies look to
to take advantage of the current market. Throughout Chicago,           negotiate their lease terms, or sign new leases to take
landlords are offering numerous incentives including free rent,        advantage of the many incentives being extended by
moving allowances, term flexibility and aggressive rates to            landlords. Companies may continue to approach real estate
attract tenants to their buildings.                                    with caution, however, resulting in fewer long-term leases.
                                                                       Increasingly competitive rental rates will remain prevalent as
Sales activity has dropped off dramatically due to the credit          owners compete to fill their vacant space. Sales activity will
crisis, limiting options to finance property sales.                    remain limited as tight credit markets make financing difficult.

Tight credit markets and absorption concerns have caused               The evolving Chicago industrial market is critical to the nation’s
speculative development to grind to a halt, and any ongoing            manufacturing, distribution and transportation industries and
speculative construction projects should be complete within the        is centrally located. These significant advantages will allow
next quarter or two. There is plenty of vacant recent speculative      the market to maintain its value and recover more quickly
construction that will serve as a market cushion and result in         than other industrial markets throughout the country.
more positive absorption in some submarkets.
Industrial Statistics | Year End 2008
                                                                                                                         4Q08 NET YTD 2008 NET                              4Q08 NEW       UNDER
 SUBMARKET                              INVENTORY                     AVAIL. SF             AVAIL. RATE               ABSORPTION ABSORPTION                                SUPPLY SF CONSTRUCTION
 O’Hare                                115,779,686                  14,662,052                12.66%             -776,073                       -1,552,685                 257,139                                0
 I-55                                   76,293,892                  11,150,232                14.61%             -574,602                         -973,775               1,407,998                          886,505
 Central DuPage                         55,258,119                   6,955,000                12.59%             -796,900                         -204,323                 139,997                                0
 I-88                                   98,771,618                  10,312,577                10.44%             -725,212                          425,885                  18,866                          463,636
 Lake County                            61,690,337                   7,912,707                12.83%          	 -649,052                          -475,737                 209,863                          248,735
 SE Wisconsin                           36,297,438                   3,246,800                 8.94%          	 -238,434                           956,464                 446,600                          125,000
 I-80 East                              84,786,569                  11,205,988                13.22%             -899,382                          168,373                 194,880                           26,200
 I-80 West                              45,458,831                   9,632,840                21.19%          	 -150,806                           -44,710               1,236,741                          184,090
 North Cook                             46,405,791                   3,334,425                 7.19%          	 -176,014                            69,302                       0                                0
 Northwest Cook                         25,808,066                   3,752,762                14.54%              122,799                          352,730                  76,248                          121,457
 I-290 North                            65,796,292                   9,049,937                13.75%           -1,571,064                       -1,244,736                       0                                0
 I-290 South                            36,612,485                   2,888,673                 7.89%             -166,391                          830,661                       0                          551,827
 North Chicago                          75,311,947                   7,626,705                10.13%           -1,033,476                       -1,172,202                  10,000                                0
 South Chicago                         121,952,219                   9,345,600                 7.66%           -1,506,746                         -155,688                 104,008                                0
 South Suburbs                          52,627,107                   8,404,986                15.97%             -324,051                         -297,557                 133,026                                0
 I-90 Elgin                             26,422,140                   3,628,341                13.73%             -230,034                         -653,963                       0                           88,771
 McHenry                                23,864,193                   3,434,521                14.39%             -289,971                          213,315                 126,023                                0
 DuPage County                          19,057,587                   1,644,733                 8.63%               65,374                          325,144                       0                                0
 Lake Suburbs                           10,543,215                     827,468                 7.85%             -287,656                          538,455                       0                           32,371

 FLEX SPACE SUMMARY
 Chicagoland   64,455,555                                             7,347,612               11.40%                      -139,041                 310,640                     62,372                        30,000

 TOTAL MARKET
 Summary     1,143,193,087                                      136,363,959                   11.98%  -10,108,298                               -2,584,407               4,423,761                      2,758,592

                                                                                                        Note: Inventory, Available SF and New Supply are expressed in net rentable square feet.

                   Historical Construction Starts and Deliveries                                                                                  Construction Starts                        Deliveries
                   Square Footage Per Quarter Starting and Completing Construction

                  7.0                                         6.8
                                      6.6
                                                                                                                                                                     6.0                                             6.2
                  6.0                                                                       5.7
                                                                                                                                                         5.1                                 5.0
                  5.0                                                           4.7
                                4.5                                 4.5                           4.3                                              4.6
Millions of SF




                                                                                                                                                                           4.3
                                                                                                        3.9    4.0          4.0                                                                          4.1
                  4.0                                   3.8                           3.8
                          3.5
                                                                                                                                        3.3 3.3
                  3.0                       3.0                                                                                   2.9
                                                                          2.6                                                                                  2.8                     2.7

                  2.0                                                                                                2.0
                                                  1.4                                                                                                                            1.5               1.5
                  1.0
                                                                                                                                                                                                               0.6
                  0.0
                         2005 1q 2005 2q          2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q                           2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q                            2008 4q

                 Source: CoStar




                                                                                                                                                                                                                           22
                                                                                                                                                         NAI Hiffman Year End 2008 Market Report
Industrial | Lake County/
SE Wisconsin
                                                                                     Vacancy and Absorption - Lake County
 Statistics
                                                                                 1,000,000                                                                                         14%
                                     Lake County            SE Wisconsin
 Market Size (SF) .......................61,690,337 ........... 36,297,438          750,000                                                                                        12%

 Overall Vacant space (SF) ...........7,912,707 ............. 3,246,800                                                                                                            10%
                                                                                    500,000
 Overall Vacancy ......................... 12.83%  .............. 8.94%                                                                                                          8%
 4Q08 Absorption (SF) .................. -649,052 ...............-238,434           250,000
                                                                                                                                                                                   6%




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 YTD Absorption (SF) .................... -475,737 ................ 956,464




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 Net Rental Rate .................... $3.00 - $5.75 .................... $4.03




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                                                                                  (250,000)                                                                                        2%
 New Supply (SF) ............................209,863 ................ 446,600
 Under Construction (SF) ................248,735 ................ 125,000         (500,000)              Vacancy Rate (%)               Net Absorption (SF)                        0%


MARKET OVERVIEW                                                                       Vacancy and Absorption - SE Wisconsin
                                                                                    2,000,000                                                                                      20%
The Lake County Industrial Submarket is predominantly
owner occupied with most of the product built since 1985.                           1,500,000
Institutional ownership has tripled over the past 10 years, and                                                                                                                    15%
spec construction has inexplicably staged a comeback since                          1,000,000

2006 due to easy credit for developers. Businesses calling
                                                                                      500,000                                                                                      10%
Lake County home are in close proximity to entrepreneurial
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The Southeast Wisconsin Industrial Submarket has seen
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                                                                                    (500,000)
a recent boom in speculative construction by institutional                                           Vacancy Rate (%)                Net Absorption (SF)

builders such as CenterPoint Properties.        “Big box”                        (1,000,000)                                                                                       0%

developments have been the trend in Southeast Wisconsin,
as large tracts of improved land are available within close                         both submarkets have posted negative net absorption for
proximity and direct access to I-94.                                                2008’s fourth quarter. However, Panattoni Development and
                                                                                    Prudential continue development of the Trumpet Corporate
The majority of the inventory in Southeast Wisconsin is                             Park in Zion, and a new 150,000 sf speculative building is
recently constructed, state-of-the-art, and functional.                             under construction.
Companies looking to flee the tax structure, politics and land
prices of Illinois will continue to spur activity in the submarket.                 In 2009, institutional owners will continue to offer significant
Speculative development in both Lake County and Southeast                           incentives to attract tenants to their buildings, and vacancy will
Wisconsin has slowed due to absorption concerns, as                                 continue to increase, while new construction winds down.

Lake County/SE Wisconsin Lease Transactions (4th Quarter 2008)
Property Address                                         Size (sf)         Tenant                                                   Comments
3600 Sunset Ave., Waukegan                               202,177           Trifinity Partners Baltimore, LLC                        Lease
880 Lakeside Dr., Gurnee                                 56,000            Hearthware Home Products                                 Lease expansion
46 Sherwood Terr., Lake Bluff                            54,000            Metropolitan Fire Restoration Services                   Lease

Lake County/SE Wisconsin Sale Transactions (4th Quarter 2008)
Property Address                           Size (sf)     Sale Price         Price psf Date                Buyer                                Seller
635 Oakwood Dr., Lake Zurich     85,263                  $4,800,000         $56.30        10/16/08        Cabot Properties                     Tideman Company
875 Woodlands Pky., Vernon Hills 57,776                  $6,841,100         $118.41       10/29/08        Kanaflex Corp.                       Private
475 Capital Dr., Lake Zurich     50,137                  $3,937,500         $78.53        12/29/08        Marly, LLC                           BBO, LLC

                                                                                                                                             Pictured above:
                                                                                        880 Lakeside Drive, Gurnee, where Hearthware Hom Products recently
                                                                                                                       expanded into an additional 56,000 sf.
Industrial | O’Hare

                                                                                            Vacancy and Absorption - O’Hare
  Statistics
                                                                                          1,500,000                                                                         14%
  Market Size (SF) ................................................... 115,779,686
                                                                                                                                                                            12%
  Overall Vacant space (SF) ....................................... 14,662,052            1,000,000
  Overall Vacancy ....................................................... 12.66%                                                                                           10%

  4Q08 Absorption (SF) .................................................-776,073            500,000
                                                                                                                                                                            8%
  YTD Absorption (SF) ................................................-1,552,685




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  New Supply (SF) .......................................................... 257,139




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  Under Construction (SF) ......................................................... 0                                                                                       2%
                                                                                                             Vacancy Rate (%)
                                                                                         (1,000,000)         Net Absorption (SF)                                            0%
MARKET OVERVIEW
The O’Hare Industrial Submarket is unique due to its close
proximity to O’Hare International Airport and its central                                 Leasing activity has been primarily limited to users in buildings
location at the crossroads of Chicago’s expressway system.                                smaller than 70,000 sf. Landlords and property managers
The O’Hare Submarket holds the most industrial inventory of                               are offering numerous incentives to attract potential tenants
all of the Chicagoland submarkets. Elk Grove Village alone                                to their buildings. These incentives include free rent, moving
is the nation’s largest industrial park, boasting more than 40                            allowances, term flexibility, and aggressive rates to make the
million square feet of industrial and flex space.                                         rental more attractive for the tenant.

Industrial land values have dropped precipitously over                                    Sales activity has dropped off dramatically due to the credit crisis
the past year since the redevelopment bubble burst when                                   limiting options to finance property sales and new projects.
O’Hare land values were near record highs around $25 psf
in 2007. This is attributed to the ailing economy, increased                              Moving into 2009, vacancy will likely continue to increase, but
vacancy and negative absorption. A majority of the recent                                 eventually stabilize. New construction has nearly ground to a
speculative construction in the O’Hare submarket is currently                             halt and absorption rates should trend more positive as much
sitting vacant. While many of the buildings in the submarket                              of the vacant space in the overbuilt submarket begins to be
are older and functionally obsolete, redevelopment and                                    absorbed slowly. Due to its many advantages and in spite
construction has slowed dramatically.                                                     of the state of the economy O’Hare will likely remain a viable
                                                                                          submarket.

 O’Hare Lease Transactions (4th Quarter 2008)
 Property Address                                             Size (sf)           Date            Tenant                                           Comments
 2451-2489 S. Wolf Rd., Des Plaines                           91,700              10/13/08        RMI                                              Lease
 1901-1905 S. Mt. Prospect Rd., Des Plaines                   62,880              10/15/08        Merkle-Korff Industries                          Renewal
 1850 Touhy Ave., Elk Grove Village                           51,000              9/30/08         Regional Expedited Shipping                      Lease
 851-853 Expressway Dr., Itasca                               50,295              10/23/08        Lake Cable, LLC                                  Lease
 321 W. Lake St., Elmhurst                                    44,587              10/23/08        Laboratory Company of America                    Lease

 O’Hare Sale Transactions (4th Quarter 2008)
 Property Address                               Size (sf)     Sale Price           Price psf Date                Buyer                          Seller
 1549 Glenlake, Itasca (5 props)                222,518        $14,398,500         $64.71         11/7/08        Cabot Properties               Teachers Insurance
 730 Thomas Dr., Bensenville                    21,333         $1,720,000          $80.63         12/3/08        Bobs Business                  Victaulic Company
 1035 Entry Dr., Bensenville                    22,177         $1,352,000          $60.96         10/22/08       Private                        Entry SRG LLC

Pictured above:
1901-1905 S. Mt. Prospect Rd., Des Plaines a 62,880 sf lease
to Merkle-Korff Industries.

                                                                                                                                                                                  24
                                                                                                                         NAI Hiffman Year End 2008 Market Report
Industrial | Central DuPage

                                                                                            Vacancy and Absorption - Central DuPage
 Statistics
                                                                                          2,000,000                                                                             16%
 Market Size (SF) ..................................................... 55,258,119
 Overall Vacant space (SF) ......................................... 6,955,000            1,500,000
                                                                                                                                                                                12%
 Overall Vacancy ....................................................... 12.59% 
                                                                                          1,000,000
 4Q08 Absorption (SF) .................................................-796,900
                                                                                            500,000                                                                             8%
 YTD Absorption (SF) ...................................................-204,323




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 New Supply (SF) .......................................................... 139,997                                                                                             4%




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                                                                                           (500,000)
 Under Construction (SF) ......................................................... 0
                                                                                                               Vacancy Rate (%)            Net Absorption (SF)
                                                                                       (1,000,000)                                                                              0%

MARKET OVERVIEW
The well-positioned Central DuPage Industrial Submarket                                rates and term flexibility. Free rent is also being advertised, as
benefits from advantages including relatively low taxes,                               landlords and property managers are factoring in the cost of
newer building product and an educated workforce. The                                  vacancy when establishing a lease.
recent construction of the I-355 extension, Chicago’s newest
expressway, has improved access to the area and spurred                                Speculative construction has declined dramatically and will
interest in the mature submarket.                                                      likely continue to do so while current vacant space is absorbed.
                                                                                       While rental rates have slightly decreased throughout the
Users in the Central DuPage Submarket vary by type and                                 submarket, construction costs are still high, thus new build-to-
are not limited to primarily distribution like other nearby                            suit projects are unlikely unless requested by a user requiring a
submarkets. Absorption was negative for the fourth quarter                             specialty building.
and the YTD tally, but not as negatively impacted as others.
Leasing activity has declined as users are uncertain of what                           Over the next 12 to 24 months sales and leasing activity will
will happen over the coming months and are currently in                                likely continue to decline, but expect to see an increase in
a holding pattern. Nevertheless, activity has not ceased                               creative, out of the ordinary deals being completed.
as tenants look to “blend and extend” with their current
landlords... many are aware there are good short and long-                             The Central DuPage Industrial Submarket will remain
term deals to be had.                                                                  fundamentally strong and should maintain its value even
                                                                                       through the current economic situation.
Landlords and property managers are extending various
incentives to attract tenants including competitive rental

Central DuPage Lease Transactions
Property Address                                             Size (sf)           Tenant                                               Comments
250 E. Kehoe Blvd., Carol Stream                             112,110             Brighton Best                                        Lease
310 Windy Point Dr., Glendale Heights                        63,720              Ricoh Americas Corporation                           Lease
1625 Hunter Rd., Hanover Park                                30,262              Johnson Pumps of America                             Lease

Central DuPage Sale Transactions (4th Quarter 2008)
Property Address                               Size (sf)     Sale Price           Price psf Date           Buyer                              Seller
869 & 901 S. Route 53, Addison 232,444                        $14,436,500         $62.11      11/7/08 Cabot Properties                        Teachers Insurance
145 Swift Rd., Addison            106,389                     $6,150,000          $57.81      12/2/08 Metals & Services Co                    American Chartered Bank
1966 Quincy Ct., Glendale Heights 68,422                      $3,000,000          $43.85      11/21/08 Matrix International                   Vallis Champion
Industrial | I-88 Corridor

                                                                                           Vacancy and Absorption - I-88 Corridor
  Statistics
                                                                                        2,000,000                                                                              14%
  Market Size (SF) ..................................................... 98,771,618
  Overall Vacant space (SF) ....................................... 10,312,577          1,500,000                                                                              12%

  Overall Vacancy ....................................................... 10.44%                                                                                              10%
                                                                                        1,000,000
  4Q08 Absorption (SF) .................................................-725,212                                                                                               8%
  YTD Absorption (SF) .................................................... 425,885         500,000




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  Net Rental Rate ...................................................$3.00 - $5.50




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  New Supply (SF) .......................................................... 482,502




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                                                                                        (500,000)
  Under Construction (SF) .............................................. 525,000                                                                                               2%
                                                                                                             Vacancy Rate (%)             Net Absorption (SF)
                                                                                       (1,000,000)                                                                             0%

MARKET OVERVIEW
The I-88 Corridor Industrial Submarket has seen increased                               alleviate traffic congestion and improve access to the recent
demand and speculative development during the past                                      industrial development.
few years due to the lack of land for development in
feeder markets such as Central DuPage and West Cook.                                    Leasing activity has been comprised of primarily short-term
Developers are drawn to the large available land sites and                              leases as tenants prefer flexibility given the current economic
easy access to major expressways that the I-88 Submarket                                climate. Landlords are extending significant incentives to
has to offer. Much of the speculative development that has                              prospective tenants. These incentives, combined with landlord
been so prevalent throughout the area has been put on hold                              flexibility, translates to plenty of opportunities for tenants in the
due to the current economic climate and the difficulty to                               market.
finance new projects. However, a major build-to-suit project
is underway in Aurora’s Prairie Point West Industrial Park.                             Through 2009, leasing will likely remain active, though
Development has begun on a 525,000 sf facility leased to                                companies may continue to approach real estate with caution,
Freudenberg Household Products for 10 years.                                            resulting in fewer long-term leases. Increasingly competitive
                                                                                        rental rates will likely continue as owners compete to fill their
Much of the recent development in the submarket has                                     vacant space.
occurred in Aurora, along Eola Road and Ferry Road, which
was widened nearly 5 years ago. Construction will begin in
2009 to install an interchange at Eola Road and I-88 with
delivery scheduled for 2010. This fully-funded project will

 I-88 Corridor Lease Transactions (4th Quarter 2008)
 Property Address                              Size (sf)     Date                Tenant                                              Comments
 2188 Diehl Rd., Aurora                        525,000       11/1/08             Freudenberg Household Products                      Lease
 1207 Bilter Rd., Aurora                       62,000        11/1/08             Victaulic                                           Lease
 1203 Bilter Rd., Aurora                       63,120        9/22/08             Reviva                                              Tenant expanded, lease

 I-88 Corridor Sale Transactions (4th Quarter 2008)
 Property Address                              Size (sf)     Sale Price           Price psf Date         Buyer                                     Seller
 2235 Corporate Ln., Naperville                157,455        $12,700,000         $80.66      12/23/08 General Supply & Services General Electric
 430 Industrial Dr., West Chicago              119,032        $5,212,408          $43.79      10/24/08 Express Packaging         Domtar Paper
 1750 Orchard Rd., Montgomery                  85,149         $4,100,000          $48.15      10/07/08 Newly Weds Foods Inc.     Private

Pictured above:
2235 Corporate Ln., Naperville, a 157,455 sf sale to
General Supply & Services


                                                                                                                                                                                     26
                                                                                                                       NAI Hiffman Year End 2008 Market Report
Industrial | I-55 Corridor
                                                                                          Vacancy and Absorption - I-55 Corridor
 Statistics
                                                                                        2,000,000                                                                             18%
 Market Size (SF) ..................................................... 76,293,832
                                                                                        1,500,000                                                                             15%
 Overall Vacant space (SF) ....................................... 11,150,232
 Overall Vacancy ....................................................... 14.61%        1,000,000                                                                             12%

 4Q08 Absorption (SF) .................................................-574,602
                                                                                         500,000                                                                              9%
 YTD Absorption (SF) ...................................................-973,775




                                                                                                                                                         08




                                                                                                                                                                         08
                                                                                                                                                       1




                                                                                                                                                                         4
                                                                                                                                                      Q




                                                                                                                                                                         Q
 Net Rental Rate ...................................................$2.40 - $7.50              0                                                                              6%




                                                                                                    06

                                                                                                         06

                                                                                                                 06

                                                                                                                       06

                                                                                                                               07

                                                                                                                                    07

                                                                                                                                          07

                                                                                                                                                07



                                                                                                                                                               08

                                                                                                                                                                    08
 New Supply (SF) ....................................................... 1,407,998




                                                                                                    1

                                                                                                         2

                                                                                                               3

                                                                                                                      4

                                                                                                                            1

                                                                                                                                    2

                                                                                                                                         3

                                                                                                                                               4



                                                                                                                                                               2

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                                                                                                                                                                              3%




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                                                                                                                                              Q



                                                                                                                                                          Q

                                                                                                                                                                   Q
                                                                                        (500,000)
 Under Construction (SF) .............................................. 886,505
                                                                                                            Vacancy Rate (%)             Net Absorption (SF)
                                                                                      (1,000,000)                                                                             0%


MARKET OVERVIEW
The I-55 Corridor has seen the most activity and development                          Continuing development along and near Weber Road and I-55
interest over the past several years of all of the Chicago area                       has led to new construction projects to improve access to the
industrial submarkets. As a result, much of the available land                        area. These projects include the widening of Weber Road and
parcels have been developed or are controlled by developers,                          the rebuilding of the Weber Road/I-55 interchange.
rendering the I-55 Corridor Submarket an “infill market” with
little additional land for new development.                                           Looking forward, new development and construction will likely
                                                                                      be limited during 2009, which will improve the position of the
Transactional activity among larger spaces (300,000-500,000                           I-55 Corridor as absorption will increase. Effective rental rates
sf) has declined, but has not been as affected with regards                           will likely remain competitive and landlords will continue to offer
to smaller spaces (less than 100,000 sf). Leasing activity                            substantial incentives including term flexibility and free rent to
will likely continue as existing tenants seek more competitive                        draw prospective tenants to their vacant space.
rental rates and flexibility from their landlords. Some tenants
will choose to “blend and extend” by renegotiating their lease                        The I-55 Corridor Industrial Submarket will remain relatively
at a lower rate and extending their term. Other tenants will                          strong due to its close proximity to Chicago, its Will County/
decide to take advantage of incentives and flexibility being                          DuPage County tax base, strong labor pool and excellent
offered by landlords that are particularly motivated to lease                         access to multiple modes of transportation.
their vacant space in light of the current economic climate.

I-55 Corridor Lease Transactions (4th Quarter 2008)
Property Address                                            Size (sf)          Tenant                                   Comments
775 ProLogis Pkwy., Romeoville                              750,500            Kimberly-Clark                           Lease
1385 N. Weber Rd., Romeoville                               230,000            SPX                                      Lease
10350 N. Beaudin Blvd., Woodridge                           174,000            Canon USA Inc.                           Lease
1165 Crossroads Pkwy., Romeoville                           107,000            Exel                                     Lease
11240 Katherine’s Crossing, Woodridge                       80,000             RJW                                      Lease

I-55 Corridor Sale Transactions (4th Quarter 2008)
Property Address                            Size (sf)       Sale Price           Price psf Date         Buyer                                      Seller
1401 Remington, Bolingbrook                 150,000         $17,237,500          $114.92 11/14/08 Goya Foods, Inc.                                 Northern Builders
51 Shore Dr., Burr Ridge                    109,900         $6,250,000           $56.87 12/23/08 PersonalizationMall.com                           Private
279 Beaudin Blvd., Bolingbrook              76,471          $7,140,000           $93.37 12/10/08 TJH Properties LLC                                Amcore Investments

                                                                                                                                                Pictured above:
                                                                                          775 ProLogis Pkwy, Romeoville where Kimberly-Clark leased 750,500 sf.
Industrial | I-80 East & West
                                                                                       Vacancy and Absorption - I-80 East Corridor
 Statistics
                                                                                     1,500,000                                                                                   16%
                                         I-80 East              I-80 West
 Market Size (SF) .......................84,786,569 ........... 45,458,831
                                                                                     1,000,000
                                                                                                                                                                                 12%
 Overall Vacant space (SF) .........11,205,988 ............. 9,632,840
 Overall Vacancy ......................... 13.22%  ............ 21.19%              500,000




                                                                                                                                         07
                                                                                                                                                                                 8%




                                                                                                                                                                          08
 4Q08 Absorption (SF) .................. -899,382 ...............-150,806




                                                                                                                                        3




                                                                                                                                                                        4
                                                                                                                                      Q




                                                                                                                                                                        Q
                                                                                             0
 YTD Absorption (SF) ......................168,373 .................-44,710




                                                                                                  06

                                                                                                       06

                                                                                                              06

                                                                                                                    06

                                                                                                                            07

                                                                                                                                 07



                                                                                                                                              07

                                                                                                                                                     08

                                                                                                                                                            08

                                                                                                                                                                  08
                                                                                                 1

                                                                                                       2

                                                                                                            3

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                                                                                                                         1

                                                                                                                                 2



                                                                                                                                            4

                                                                                                                                                   1

                                                                                                                                                            2

                                                                                                                                                                 3
 Net Rental Rate .................... $2.00 - $4.25 ........$2.50 - $4.50                                                                                                        4%




                                                                                                 Q

                                                                                                     Q

                                                                                                           Q

                                                                                                                 Q

                                                                                                                       Q

                                                                                                                             Q



                                                                                                                                            Q

                                                                                                                                                 Q

                                                                                                                                                         Q

                                                                                                                                                                Q
                                                                                     (500,000)
 New Supply (SF) ............................194,880 ................ 384,741                            Vacancy Rate (%)             Net Absorption (SF)

 Under Construction (SF) ..................26,200 ................ 184,090       (1,000,000)                                                                                     0%

                                                                                       Vacancy and Absorption - I-80 West Corridor
MARKET OVERVIEW
                                                                                     1,000,000                                                                                   25%
The advantages of the I-80 East and West Corridor
Submarkets include access to multiple highway arteries that                           750,000
                                                                                                                                                                                 20%
can position companies well for distribution throughout the
                                                                                      500,000
entire midwest. It is due to this fact that large distribution                                                                                                                   15%
companies often target this area and in turn developers                               250,000
position themselves with “big box” facilities. Much of the




                                                                                                                                          07




                                                                                                                                                                     08

                                                                                                                                                                            08
                                                                                                                                                                                 10%




                                                                                                                                        3




                                                                                                                                                                    3

                                                                                                                                                                          4
                                                                                                                                       Q
development in this region in particular has been driven by




                                                                                                                                                                  Q

                                                                                                                                                                        Q
                                                                                            0
the nation’s largest inland port, the BNSF Logistics Park -
                                                                                                  06

                                                                                                       06

                                                                                                              06

                                                                                                                    06

                                                                                                                            07

                                                                                                                                 07



                                                                                                                                                07

                                                                                                                                                     08

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                                                                                                                                                                                 5%
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                                                                                                       2

                                                                                                            3

                                                                                                                   4

                                                                                                                         1

                                                                                                                                 2



                                                                                                                                             4

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                                                                                                                                            Q

                                                                                                                                                  Q

                                                                                                                                                         Q
Chicago. Even though transportation volumes have declined                            (250,000)

in the recent economic climate, CenterPoint Intermodal                                                   Vacancy Rate (%)             Net Absorption (SF)
                                                                                     (500,000)                                                                                   0%
Center (CIC), adjacent to the BNSF Logistics Park - Chicago,
remains the bright spot for not only the I-80 Corridor, but the                  benefit from the CIC advantages. Therefore, non-importing
greater Chicago region as well. Activity level and transaction                   tenant opportunities continue to set low-mark lease rates in
volume at CIC continue as companies position themselves to                       the corridor as the tenants have several options to consider.
take advantage of the transportation and Foreign Trade Zone
(FTZ) benefits. In addition, CenterPoint will be constructing                    With the exception of CIC, all new speculative construction has
an additional intermodal center approximately five miles north                   been halted to allow for further absorption in the corridor. We
of the BNSF operation.                                                           do not anticipate any speculative construction until 2010. The
                                                                                 location of the corridor positions it well for the future, however
Outside of CIC, landlords are aggressively pursuing those                        additional absorption must occur before achieving a balance
“big box” tenants that do not import and therefore cannot                        between supply and demand.

Major I-80 Corridor New Speculative Developments
Development Name                                    City                 Size (sf)           Developer                                           Status
CenterPoint Intermodal Center                      Elwood, IL            1,182,500           CenterPoint Properties                              Completed
AMB Minooka Distribution Center                    Minooka, IL           1,000,743           AMB Property Corporation                            Completed
Minooka Ridge Business Park                        Minooka, IL           965,183             OPUS                                                Completed
Tinley Park Corporate Center                       Tinley Park, IL       915,643             First Industrial                                    Completed
Laraway Crossings Distrubution Center              Joliet, IL            736,780             Exel Real Estate                                    Completed
Ameriplex at the Port                              Portage, IN           574,249             TCB Development                                     Completed
LogisitCenter at Sauk Village                      Sauk Village, IL      496,260             DP Partners                                         Completed
Bailly Ridge Corporate Center                      Monee, IL             431,600             LFI International                                   Completed
The Randolph                                       Portage, IN           399,500             Holladay/Lincoln                                    Completed
Rock Run Business Park                             Joliet, IL            339,741             IDI Services Group                                  Completed

Pictured above:
Rock Run Business Park, where a 339,741 sf building delivered in November.
                                                                                                                                                                                       28
                                                                                                                   NAI Hiffman Year End 2008 Market Report
Industrial | Logistics
The Future of Real Estate is Driven by Transportation
     Even in the current economic cycle, the Class I railroads continue          These volumes are going to have a significant effect on the real
to improve their infrastructure. Intermodal shipments will eventually       estate market and how the product is distributed throughout the
increase and will be driven by driver cost and productivity limitations,    Midwest. As supply chain costs continue to be broken down and
highway infrastructure issues and energy concerns (fuel).                   scrutinized, the proximity of a client’s distribution center to its inbound
     These challenges coupled with companies focusing on landed             freight (Inland Port), along with its outbound locations, will be crucial.
cost have literally “fueled” the corporate focus on transportation costs,        The below analysis focuses on significant cost savings based on
import distribution centers (both coastal and inland), and service.         the proximity of a distribution center to the intermodal ramp (dray
With fuel cost volatility, insurance costs and driver turnover; carriers    savings) as well as Foreign Trade Zone (FTZ) benefits. The container
and corporate America are concentrating on how to stay as efficient         volumes shown are estimates that could be generated by a 500,000
as possible. Regulatory issues like hours of service and increased          square foot distribution center.
emission specifications are adding to the mix creating less capacity                                                               CenterPoint Intermodal Center    Next Closest
and higher costs with higher service levels expected.                       Dray Cost Comparison                                   Elwood, Illinois                 Location

     As alternative port sites develop in importance for our country’s      Approximate roundtrip dray cost to facility      $ 92                   $ 137
throughput, transportation lanes will evolve simultaneously. Truckload      Approximate fuel surcharge (14%)                 $ 13                   $ 19
                                                                                                                             $ 105                  $ 156
capacity will continue to be a challenge as the driver labor pool is
                                                                            Estimated roundtrip turns per driver shift         6-8                    3-4
in decline. The American Trucking Association anticipates that freight
                                                                                  Est. Annual          Minimum Cost Outside           CenterPoint       Annual
volumes will grow by 32.5 percent by 2015 and it projects a driver           40’ Container Volume      The Intermodal Center      Intermodal Center     Savings
shortfall of 111,000 drivers by 2014. This will force carriers to be                5,000                     $780,000                $525,000         $255,000
more selective in the freight they handle and reject business they
view unprofitable. This push will position the railroads to move more           In addition, an FTZ benefit analysis should be considered based
intermodal traffic. We have seen this increase in the Midwest with          on potential import volume. One of the primary benefits of an FTZ is
the BNSF Logistics Park-Chicago, located adjacent to CenterPoint            the ability to process U.S. Customs entries on a weekly basis while
Properties Intermodal Center in Elwood, which handled approximately         maintaining the same maximum processing fee as if entering on a per
750,000 lifts in 2007 over 800,000 lifts in 2008, even in our current       entry basis. For example: depending on the value of merchandise,
challenging economic conditions.                                            there is an average merchandise processing fee of $200 per entry
     This amplifies the importance of site selection and positioning for    (regulatory minimum of $25 and maximum of $485). An FTZ allows
networks that project a large amount of import volume. Import DCs,          for one weekly entry of $485 versus a fee per every entry.
dray cost, and Foreign Trade Zones have become more critical to
                                                                            FTZ Benefit Comparison
remain competitive. The following illustrates the dramatic increases in
                                                                                                                        Non-FTZ       FTZ                          Annual Savings
projected freight demand. A global company has to consider how this         Annual U.S. Customs Entry Fees              $400,000      $25,220                      $374,780
will affect their supply chain.                                             (Assuming 2,000 entries & $200 per entry)                 (485 max fee x 52 weeks)



 Dramatic Increase in Projected Freight Demand                              The combined effect is illustrated on the table below:

                                                                            CenterPoint Intermodal Center Dray & FTZ Combined Benefits
                                                                            Projected annual dray savings                                       $255,000
                                                                            Projected annual FTZ savings                                        $374,780
                                                                            Combined annual savings                                             $629,780
                                                                                       Based on 500,000 SF facility annual savings of $629,780 = $1.26 psf

                                                                                Take note that the dray and FTZ calculations represent substantial
                                                                            ANNUAL ONGOING operational savings. With these benefits, a
                                                                            facility with close proximity to an Inland Port is no longer an option but
                                                                            a requirement. The real estate rental rate is fairly insignificant when the
                                                                            whole picture is taken into consideration and the logistics costs are
                                                                            evaluated. With today’s speed of business, it’s no longer company
                                                                            versus company but supply chain versus supply chain.

                                                                            Daniel P. Leahy, SIOR is executive vice president of NAI Hiffman and
                                                                            managing director of NAI Global Logistics. Adam Roth, CCIM is a senior
                                                                            associate at NAI Hiffman and director of NAI Global Logistics.
Industrial | Methodology / Definitions/
                                      Submarket Map
METHODOLOGY                                                                      Walworth                                                              Twin
                                                                                                                                                       Lakes
                                                                                                                                                                                WISCONSIN
The information included in this report is the result of a                                                                                                                       ILLINOIS

compilation of information on Class A, Class B and Class             Hebron                                                            Spring
                                                                                                                                       Grove                                                                               Gurnee

C industrial properties located in the Metropolitan Chicago
                                                      Harvard
                                                                                                                                                                                     Lake County/
area. NAI Hiffman obtained the information from property                                                                                                                             Southern WI
representatives, CoStar Group and other sources. NAI                                                                                                                         Round
                                                                                                                                                                                                                                       Waukegan                         Lake Michigan




                                                    MCHENRY CO.
                                                                                                                                                                             Lake
Hiffman greatly appreciates the participation of each of theseWoodstock                                                              McHenry




                                                    BOONE CO.
                                                                                                                                                                                                            Libertyville

individuals and companies, without whose help this report




                                                                                                                                                        MCHENRY CO.
                                                                                                                                                                                             Mundelein                     94




                                                                                                                                                        LAKE CO.
would not have been possible.                          Marengo
                                                                                                                                                                                                                                      Lake
                                                                                                                                                                                                                                      Forest
                                                                                                                           Crystal                                                                          Lincolnshire
                                                                                                                           Lake                                            Lake                                                        Highland
                                                                                                                                                                           Zurich                                                      Park
All the information gathered is databased and continues to                                                     Lake in
                                                                                                               the Hills
                                                                                                                                                                                                                                      Deerfiield
be updated on an ongoing basis. From this database total                                    MCHENRY CO.
                                                                                            KANE CO.
                                                                                                                                                                        LAKE CO.
                                                                                                                                                                        COOK CO.
                                                                                                                                                                                                                Buffalo
                                                                                                                                                                                                                Grove
inventory, vacancy, rental rate and absorption figures may                                                                                             Northwest
                                                                                                                                                                                                               Arlington
                                                                                                                                                                                                                                        Northbrook
                                                                                                           90                                          Cook    Palatine
                                                                                                                                                                                                                                North Cook
be calculated and presented. Total inventory may change                                                                                                                                                  53
                                                                                                                                                                                                               Heights
                                                                                                                                                                                                            Rolling                       Glenview
                                                                                                                                                                                                                                294
from year to year as a result of new construction or newly                                                                                                            Hoffman Estates
                                                                                                                                                                                                            Meadows
                                                                                                                                                                                                                           Des
                                                                                                                                                                                                                                                         94
                                                                                                                                                                                                                                                              Evanston
                                                                                                                                                                                                                                          Niles
renovated buildings, conversion, sale, or recently remeasured                                                                    Elgin                                       Schaumburg 290                       90       Plaines                        Skokie
                                                                                                                                                                                                EE
                                                                                                                                                                                            'HAR XPWY.      O'Hare Rosemont
properties. The database is thoroughly checked and balanced
                                                  Sycamore                                                                                               COOK CO.
                                                                                                                                                                                        IN
                                                                                                                                                                                          -O




                                                                                                                                                                                LG
                                                                                                                                                                                    E
                                                                                                                                                         DUPAGE CO.
                                                                                                                                                             Central                                                          190
throughout the year.                                                                                                                                         DuPage
                                                                                                                                                                                                              Elk Grove                 I-290
                                                                                                                                                                                                                                                               90
                                                De Kalb                                                                                                                 Carol Stream                     Addison 290                    North                       94
                                                                  DEKALB CO.




                                                                                                                                                                                                                                 Melrose
                                                                                                                                                                                                                                                  Oak
                                                                  KANE CO.




                                                                                                                                St. Charles                                                                                      Park
DEFINITIONS                                                                            Elburn
                                                                                                                                                                                                         Lombard                                  Park                               Chicago
                                                                                                                                         DUPAGE CO.



                                                                                                                                                                                          Glen 355 Oakbrook
                                                                                                                                         KANE CO.




                                                                                                                                                                                                                                                   290
                                                                                                                                                                                          Ellyn
The NAI Hiffman Industrial Market Report tracks several basic                                                         Batavia
                                                                                                                                                                                                   Terrace
                                                                                                                                                                                                                                                    Cicero
                                                                                                                                                        Warrenville
                                                 West is
measures of market conditions. This information to collected
                                                 Rochelle I-88                                                                                                                                                    Oak 294
                                                                                                                                                                                                                  Brook   La Grange                      55 CHICAGO             90
                                                                                                                                                                      88
for individual buildings and then consolidated into submarket                                                                                                         Naperville
                                                                                                                                                                                          Lisle      Downers
                                                                                                                                                                                                     Grove
                                                                                                                                                                                                                                                              MIDWAY
                                                                                                                                                                                                                                                              AIRPORT
                                                                                                                                                                                                                                                                                94
                                                                                                                                Aurora
and market totals.                                             Sugar
                                                               Grove
                                                                                                                                                                                                  Woodridge                                    Bedford
                                                                                                                                                                                                                                               Park
                                                                                                                                                                                                                                                             Oak                               90
                                                                                                                                                                                                                                                             Lawn
New Supply measures industrial properties newly delivered                                                                                                                    Bolingbrook
                                                                                                                                         KENDALL CO.




                                                                                                                                                                                                          DUPAGE CO.
                                                                                                                                           WILL CO.




                                                                        KANE CO.
                                                                                                                                                                                                          COOK CO.
                                                                        KENDALL CO.                                                                                                                                                           Palos                      57
to market and added to the database. Generally excluded are
                                                 Sandwich                                                                                                                      I-55                        Lemont                             Heights
                                                                                                          Yorkville                                                                                                                  Orland                                                                 East
                                                                                                                                                                                                                                                                                Harvey
government facilities and owner-occupied build-to-suits.                                                                                                                      Romeoville                                             Park                                                94
                                                                                                                                                                                                                                                                                                           Chicago Gary

                                                                                                                                                                       55                                                                       Tinley
                                                                                                                                                                                                                                                Park                                                  Hammond

Market Size includes the total square footage of rentable                                                                                                                                                    I-80                                                                                   Munster
                                                                                                                                                                                                                                     80




                                                                                                                                                                                                                                                                                                INDIANA
                                                                                                                                                                                                                                                                                                ILLINOIS
                                                        Newmark                                                                                                                                                              Mokena                                     Chicago
space, vacant and occupied, in the market. Inventory includes                                                                                                               Joliet
                                                                                                                                                                                                                                                                        Heights
                                                                                                                                                                                                              New                Frankfort                                                                    Schererville
all non owner-occupied buildings over 10,000 sf.                                                                                                                                                              Lenox                                                 COOK CO.
                                                                                                                                                                                                                                                                                  Chicago
                                                                                                                                                                                                                                                                                  Hts.
                                                                                                                                                                                                                                                                    WILL CO.
                                                                                                                                  80
                                                                                                                                 Minooka                                                                                                                        University
                                                                   KENDALL CO.
                                                                   LASALLE CO.




                                                                                                                                                                                                                                                                  Park
Net Absorption measures the net change in occupied space                                         KENDALL CO.
                                                                                                 GRUNDY CO.

over a period of time for a particular market or submarket.                                                   Morris                                                                                                                                                                                         Cedar Lake

                                                                                                                                                                                                                                                                         Beecher
                                                                                                                                                                                                                                                   Peotone
Overall Vacancy measures unoccupied industrial space,                                                 Weighted Asking Gross Rents provide the average rental rate
                                                                                                              Coal
both direct and sublease, as a percentage of the total market.                                                      for properties in the market. These averages are
                                                                                                      being quoted Wilmington
                                                                                                              City
                                                                                                                                                                                                                                                                 WILL CO.
                                                                                                                                                                                                                                                                 KANKAKEE CO.



                                                                                                      weighted by total square footage vacant per property class with
Sublease Vacancy measures unoccupied industrial space                                                 a given submarket to obtain a total submarket average. Industrial
being marketed for sublet as a percentage of the total market.                                        rents are presented on a weighted gross, or full service, basis.
                                                                                                      We caution the reader against accepting this rate as an exact
Under Construction measures buildings that have begun                                                 measure of effective rental rates. However, we believe that
development to a substantial degree.                                                                  average quoted rates are useful in generalizing rental rate trends
                                                                                                      when observed over a period of time.
Available Space measures the total amount of space that
is currently being marketed as available for lease or sale                                            Asking Rental Rate is the rate per square foot for a particular
in a given time period. It includes space that is available,                                          space being marketed for lease. Disclosure of the basis for the
regardless of whether the space is vacant, occupied or                                                asking rental rate is required (i.e. gross, modified net, etc.)
available for sublease. Available space excludes shadow
space.

                                                                                                                                                                                                                                                                                                                     30
                                                                                                                                                                                              NAI Hiffman Year End 2008 Market Report
Retail | Year End 2008
Retail sales throughout the Chicago Metropolitan Area
decreased by 1.48 percent during the first three quarters              Retail Sales by County
of 2008 as compared to the same time period last year.                 Jan - Sep 08
                                                                       in $ billion                            44.1
According to the Illinois Department of Revenue, retail sales
for the first nine months of 2008 totaled approximately $76.5
billion compared to 2007’s January through September total
of about $78 billion. Approximately 57 percent of this total
comes from sales in Cook County, 16.5 percent in DuPage
                                                                                                                          12.6
County, and 10 percent in Lake County with the remainder
                                                                                                                                                       7.8
divided among the three outlying counties. Will County                                                                                    4.3                                    5.3
                                                                                                                                                                    2.5
experienced modest retail sales growth, while the remainder            IL Dept. of Revenue

of the Chicagoland counties experienced negative retail                                                     Cook DuPage Kane                       Lake McHenry                  Will
sales growth. The most significant decrease in sales growth
rate occurred in Cook County.
                                                                       6-County Retail Sales Growth
Due to economic conditions, the housing market, and the                Jan-Sep 07 vs. Jan-Sep 08
lack of new construction, the lumber, building and hardware            in percent
                                                                                                                   5.16
sector showed a significant decline of 12.31 percent in                 1 General Merch.                                  2.27
                                                                                                                                                                   3.70
                                                                                                                                                                          1.46
2008, following a 4 percent decline in 2007. Auto and filling           2 Food
                                                                        3 Drinking & Eating Average
stations also posted a steep decline of more than 8 percent.            4 Apparel                 (1.48%) (0.60)
                                                                                                                                 (2.19)                                          (2.68)
The drinking and eating as well as drugs and miscellaneous              5 Furn. & H.H. & Radio
                                                                        6 Lumber, Bldg, Hardware
retail sectors posted the strongest gains of the year.                  7 Auto & Filling Stations                                         (6.03)
                                                                        8 Drugs & Misc. Retail                                                            (8.11)
                                                                        9 Ag. & All Others
The pace of new retail construction has slowed during                  10 Manufacturers
                                                                                                                                                (12.31)
2008 and will likely continue to do so into 2009 due to                IL Dept. of Revenue                 1          2    3       4       5       6         7      8      9      10
the current economic climate. Despite the construction
slowdown, many projects remain in the pipeline. The Bridge
Street Town Center in Joliet will break ground in early 2009
and will total nearly 1.5 million square feet of retail space.


Major Retail Lease Transactions
Property Address                               Size (sf)      Tenant                                                      Comments
130 N. Garland Ct., Chicago                    57,000         L.A. Fitness                                                Lease
261 S. Weber Rd., Romeoville                   86,960         Kohl’s                                                      Lease
Water Tower Place                              52,000         American Girl Place                                         Lease
Westfield Old Orchard                          27,200         Zara                                                        Lease


Major Retail Sale Transactions
Property Address                        Size (sf)    Price (mil) Price psf      Buyer                                              Seller
300-310 N. Michigan Ave., Chicago         273,262    $31.3      $115            William Warman                                      Harry Huzenis
7516 Pershing Blvd., Kenosha              186,417    $7.9       $42             Ener-Con Cos Inc.                                   L. Joseph Seegers Inc.
6436-6444 Columbia Ave, Hammond 183,119              $12.5      $68             Menard’s                                            HSS Management Co.
606 Randall Rd., South Elgin              138,212    $20.4      $147            Angelo Caputo’s Markets                             Kite Realty Group
3000 Kirchoff Rd., Rolling Meadows        130,909    $16.9      $129            Ramco-Gershenson Props                              Centro Properties Group
10-98 Biesterfield Rd., Elk Grove Village 121,507    $22.5      $185            Westwood Financial Corp.                            GE Pension Trust
1971 Galena Blvd., Aurora                 89,000     $9.1       $102            West Aurora Plaza LLC                               Safeway Inc.
820-892 Rte. 59, Bartlett                 87,732     $12        $137            Paul Scardino                                       Craig Stevens Development
Multifamily | Year End 2008
Historically, the Chicago metropolitan area multifamily
rental market experienced minimal new development and             Multifamily Transaction Volume and Capitalization Rate
                                                                  Market-rate complexes great than 100 units, cap rate NOI before reserves
low transaction volume for a primary market as well as
                                                                    $500                                                                                             10%
modest, but steady rental growth and stable occupancy                                  Cap Rate (%)
                                                                                       Transaction Volume ($Millions)
levels. Through the years Chicago, unlike the coastal               $400                                                                                             8%
markets, did not experience dramatic swings in market
conditions. Owners were mostly private with long-term hold          $300                                                                                             6%
perspectives and conservative approaches to leasing.
                                                                    $200                                                                                             4%
                                                                                                                                                  10-Year Average
This conservative approach to investing and leasing                                                                                             Transaction Volume

changed in the late 1990’s when investors from typically            $100                                                                                             2%

more progressive coastal markets entered the market
                                                                      $0                                                                                             0%
seeking stability, better returns and intentions of increasing




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rents beyond the previously common 3-5 percent annual




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increases. As a result, transaction volume increased,
rental rates were pushed beyond historical levels and sub-
metering of utility costs, a novel concept to most local          Sale Transaction History by Year Built
owners, was implemented in many apartment communities.              $200                                                                                             12%

                                                                                                                                                                     10%
With the onset of the 2000 recession and the events                 $160
of 2001, transaction volume decreased and rental                                                                                                                     8%
concessions became more commonplace as occupancy                    $120
                                                                                                                                                                     6%
rates struggled in all submarkets. Following this brief
                                                                     $80
recession, interest rates falling to historic levels and an                                                                                                          4%
improving job market allowed many renters to transition into
                                                                     $40                                                                                             2%
homeowners, eventually leading to historically high levels
of homeownership and the ideal market for the previously              $0                                                                                             0%
dormant condominium converter investor. During the
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period of 2003-2006, condominium conversions attributed
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to roughly 38 percent of the total suburban transaction                            Pre-1980 Price/Unit ($Thousands)              Pre-1980 Property Cap Rate (%)
                                                                                   Post-1980 Price/Unit ($Thousands)             Post-1980 Property Cap Rate (%)
volume and the compression of the cap rate differential
between vintage and newer properties. As a result, tens of
thousands of rental units were removed from the market and
capitalization rates for vintage properties reached new lows.     Capitalization Rate Differential by Year Built
                                                                  (Pre-1980 vs. Post-1980 construction)
Property landlords, finding it difficult to maintain occupancy
due to the stunted pool of renters, found it hard to resist the      180
                                                                                                              Difference in Cap Rates (Basis Points)
                                                                                                                                                                     100%

advances of the converter investors, as transaction volume           150
                                                                                                              Percentage of Pre-1980 Construction Sales (%)
                                                                                                                                                                     80%
had nearly doubled from earlier years.
                                                                     120
                                                                                                                                                                     60%
This exuberant trend lasted through the end of 2007, when             90
the credit crisis hit and everything came to a screeching halt.                                                                                                      40%
As banks closed the spigot for financing, investors headed            60

for the bunkers and home foreclosures skyrocketed as                  30
                                                                                                                                                                     20%
job losses accelerated. 2008 saw significantly decreased
transaction volume and increased capitalization rates.                 0                                                                                             0%

Vacancies increased throughout all submarkets (Chicago’s
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CBD being most affected), resulting in various concessions
from landlords.
                                                                                                                                     Pictured above:
                                                                                               Park Evanston, a 283-unit sale to Teacher’s Insurance
                                                                                                         and Annuity Association for $101.1 million.



                                                                                                                                                                            32
                                                                                                     NAI Hiffman Year End 2008 Market Report
Multifamily | Year End 2008
2009 Outlook
Looking forward to 2009, the Chicago residential market will                     Annual Transaction Volume By Investor Type
experience both opportunities and challenges. Continued                          in millions of dollars
job loss will continue to negatively impact rental rates and                     $1,200
occupancy levels. The concentrated amount of new supply of                                            Private Investor
                                                                                                      Institutional Investor
condominium projects in the CBD will exacerbate occupancy                        $1,000
                                                                                                      Condo Converter Investor
loss, resulting in that submarket being particularly hard hit.                     $800
Interest rates will remain low with the biggest difference from
past years being the underwriting parameters of lenders. Gone                      $600

are the days of pro forma underwriting, interest only and low                      $400
debt cover ratios. Equity will be more costly as there is a broad
reprising of risk, and good banking relationships will be even                     $200

more crucial going forward.                                                           $0




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Opportunities in 2009 included the purchase of defaulted loans,




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or distressed or undermanaged properties. These opportunities
will likely continue for next couple years as billions of dollars of
CMBS loans mature. Buying well-located infill properties close                   2000-2008 Suburban Chicago Multifamily Development
                                                                                 Market-rate complexes greater than 100 units
to public transportation should be an investment focus, they
are typically the first to recover.                                                3,000
                                                                                                                                                         Number of units developed
                                                                                   2,500
There is plenty of good news for long-term investors. The days
of subprime and no money down financing for home purchases                         2,000

have passed, which will result in the homeowner rate dropping                      1,500
from historic levels. This, combined with the large incoming
generation of renters, will lead to increased occupancy levels.                    1,000

Supply constraint will also play a positive role in the long-term                    500
fundamental for apartments.
                                                                                      $0
                                                                                             DuPage        Lake       Kane         Will        Kendall     Cook       McHenry
Public and private investors will continue to see Chicago as an
excellent place to invest long-term due to the decreased supply
of rental units and a diversified economy that has traditionally
fostered tremendous growth. The demand created by these
investors will eventually result in a recovery for all classes of
apartment properties throughout the Chicago metropolitan
area.

 Major Multifamily Sale Transactions
 Property                              Size (sf)   Units Price (mil) Price psf    Buyer                                          Seller
 Lakehaven Apts., Carol Stream        427,280      492    $52.3      $122.29      F&F Realty Company                             AIMCO
 Fountains of Stone Crest, Westmont   388,500      400    $38.7      $99.49       Redwood Capital Partners                       AvalonBay Communities, Inc.
 Belmont House, Chicago               315,000      269    $56        $177.78      Newcastle Limited                              Wexenthaller Realty Management
 500 Lakehurst Rd., Waukegan          303,120      384    $30.65     $101.12      Redwood Capital Partners                       Waterton Associates LLC
 Park Evanston, Evanston              282,384      283    $101.1     $358.11      TIAA-CREF                                      Robert Chodos UBS Tower LLC
 7501 Gladstone Dr., Naperville       260,106      280    $39.2      $150.71      UBS Realty Investors LLC                       The Lincoln National Life
 Yorktree Apartments, Carol Stream    258,721      293    $21.1      $81.56       Friedkin Realty Management                     AIMCO
 Woodlake Apartments, Gurnee          246,810      260    $34.3      $138.77      Benjamin E. Sherman & Son                      ING Clarion Partners, LLC
Investment | Year End 2008

2008 – A Dismal Year By Recent Comparison                       Chicago CBD Office Annual Sales
                                                                Properties larger than 150,000 SF, in billions of dollars
Given the turmoil surrounding the capital markets and, not
coincidentally, the broader economy, it is no surprise that        $7.0

investment activity in the Chicago area commercial real            $6.0
estate market declined substantially in 2008. It is all about      $5.0
confidence, or lack thereof. There are many culprits to
choose from: accelerating job losses, major equity markets         $4.0

down more than 50 percent from their peak in late 2007,            $3.0                        10-Year Average

declining home prices, and a banking industry that can             $2.0
be described as either challenged or bankrupt, depending
                                                                   $1.0
on your level of optimism. As a result, fatigue set in on the
commercial real estate market. Not only was there a dearth           $0
of transactions in 2008, but the speed and magnitude of




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the changes within the investment landscape caught many
Chicago real estate investors off guard.                        Chicago Suburban Office Annual Sales
                                                                Properties larger than 50,000 SF, in billions of dollars
How Did We Get Here?                                               $3.0

Since economics is as much art as science, there is                $2.5
no single definitive cause of the current malaise. Still,
most pundits agree that the current economic crisis                $2.0
emerged from a credit-fueled residential property bubble.
                                                                   $1.5
Homebuyers (and subsequently commercial real estate
investors) mispriced risk and overextended themselves.             $1.0
The banking and mortgage industry discarded sound                                         10-Year Average
                                                                   $0.5
underwriting criteria. Wall Street provided the fuel for
easy credit with their creation of collateralized debt               $0
securities and ability to securitize anything and everything.
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Ratings agencies were complicit in their robust approval
of questionable investment products. Institutions and
other investors eagerly bought structured credit in their       dramatically different place as compared to prior years.
desire for higher yields. And all this time government          Nowhere was the change as evident as in the downtown
regulators were nowhere to be found. The credit party           Chicago office market, where sales totaled less than $1.3
lasted for years and there is plenty of blame to be shared.     billion. This paled in comparison to the investment sales
                                                                of $6.7 billion and $4.6 billion recorded in 2006 and 2007,
For purposes of the commercial real estate industry, it         respectively. During those peak years capitalization rates were
comes down to liquidity. For too many years the world was       compressed into the low 6% range for Class A office properties.
awash in capital, and real estate investors grew accustomed
to highly leveraged transactions. Debt was cheap and            Similar trends were also evident in the suburban office and
abundant. Underwriting criteria grew lax. Real estate as        the industrial markets. In 2008, total suburban Chicago office
an asset class was gaining favor. And buyers of all sorts—      sales totaled a paltry $465 million, much less than half the $1.3
institutions, opportunity funds, private buyers and foreign     billion in annual sales averaged during 2005, 2006 and 2007.
capital—competed aggressively for properties. Transaction
volumes reached all-time highs with buildings trading at        Statistics from the East-West Corridor were indicative of the
record per-square-foot prices, and buyers employing higher      broader story and illustrate the pricing trend. In 2008, the
levels of debt while settling for lower cap rates.              total dollar volume of multi-story office building sales in this
                                                                suburban submarket totaled $53 million, with an average
In 2008, however, the investment environment was a              price of $133 per square foot. This pales in comparison to the




                                                                                                                                                     34
                                                                                                  NAI Hiffman Year End 2008 Market Report
Investment | Year End 2008
almost $1.1 billion of multi-story office sales recorded during    Chicago Industrial Annual Sales
2007, with the average per-square-foot price of $217. Of           Properties larger than 50,000 SF, in billions of dollars
course the 2007 totals reflect the acquisition of the high-           $4.0
quality Equity Office Properties portfolio from Blackstone
by GE Real Estate, but significant transactions like this
                                                                      $3.0
often signify a short-term peak in the investment market. In
hindsight, that appears to be true once again. In fact, at the
height of the cycle the highest quality suburban properties           $2.0
                                                                                                  10-Year Average
with solid credit tenants and excellent amenities could
attract bids of $250 per square foot, equating to a mid-6%            $1.0
cap rate. Today, given the lack of debt availability, the very
best a seller might expect would be a mid-8% cap rate.
                                                                        $0




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Where We Are Going?




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There are numerous challenges plaguing today’s investors in
the Chicago-area market. The dearth of transactions in itself      this assumption, the question then begs on where should
makes it very difficult for buyers to value properties with a      investors look?
high degree of confidence. There are not many—sometimes
any—comparable sales with which to measure value. The              Savvy buyers may want to take the current opportunity to
lack of confidence that has permeated all segments of the          trade up into core or core-plus type assets. Quite simply, target
economy has certainly impacted the commercial real estate          assets that might typically attract the most institutional interest.
market. Investors don’t think they can time the market             Those buyers who held firm to their conservative underwriting
recovery, but they don’t want to get in too early.                 criteria and were priced out of the market at the tail end of the
                                                                   prior cycle are now in an enviable position. In the downtown
The overall pool of buyers has also thinned significantly.         Chicago market, there will be opportunities to acquire high-
Many of the pension funds, endowments, insurance                   quality assets in the West Loop, which continues to be a favored
companies and other institutional investors are challenged         tenant location due to its proximity to commuter train stations.
by denominator and liquidity issues. The value of all their        For industrial property investors, new, single-tenant facilities in
assets has declined, and thus the corresponding segment of         the I-55 Corridor or properties in the land-constrained O’Hare
their portfolios allocated to commercial real estate exceeds       submarket might be prime targets.
the target allocation. Other buyers, like the investment
banks and highly leveraged opportunity funds are out of the        There may also be opportunities further out on the risk-reward
market altogether. Some no longer exist. REITs have been           curve, but buyers of Class B and C assets will need to ask
hurt by their low share prices and in some instances debt          themselves where the absorption will come from. In downtown
that needs to be refinanced. As a result, there just aren’t        Chicago, negative net absorption continues to be the norm in
many aggressive buyers in today’s market.                          all submarkets and sublease listings are on the rise. The same
                                                                   is true in suburbs where vacancies run even higher. The lagging
Perhaps the biggest challenge facing the Chicago investment        nature of the markets leads us to believe that effective rents will
market is the disappearance of debt. In 2007, the CMBS             continue to fall for the next several quarters at a minimum. As
market in the US totaled $230 billon. Amazingly, this shrunk       a result, more conservative underwriting is advised. In fact, any
to only $12 billion in 2008. Debt capital is very difficult to     investor implementing a value-add type strategy should target
attract right now, and that certainly will be reflected in asset   returns that compensate the heightened level of risk in the
pricing going forward.                                             current investment environment.

Yet capital market dislocations and turmoil also create            Although no one can predict with certainty when the economy
opportunity. For those investors with debt and equity,             will turn or where cap rates will top out, there will nevertheless
opportunities are bound to emerge. In fact, 2009 and years         be opportunistic acquisitions in coming quarters throughout the
ahead may prove to be historic buying opportunities. Under         Chicago-area investment market.
NAI Hiffman
Committed to Chicagoland. Connected to the World.™




Corporate Office
One Oakbrook Terrace Suite 600
Oakbrook Terrace IL 60181
tel 630 932 1234
fax 630 932 7258

Downtown Chicago Office
222 West Adams Suite 1880
Chicago IL 60606
tel 312 327 6900
fax 312 923 8023

Indiana Office
8105 Georgia Street
Merrillville IN 46410
tel 219 680 3352
fax 219 757 3516

www.hiffman.com

				
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