SIOR New Mexico Chapter Industrial & Office Update

1. SIOR New Mexico ChapterIndustrial & Office Update 1

2. SIOR is the leading industrial and office real estate • brokerage association. • SIOR confers the SIOR designation to only the most • knowledgeable, experienced, ethical, and successfulcommercial real estate brokerage specialists. SIOR Market Update

3. SIOR NM Chapter Members

4. THANK YOU SPONSORS!

5. Overall local Industrial and Office Statistics • Comparison to Regional Markets • Jim Smith – Discuss Industrial Sector • Tom Jenkins – Discuss Office Sector • Questions AGENDA

6. LOCAL STATISTICS

7. Peak - 11% Current- 9% Recession Low Point - 5% LOCAL STATISTICS

8. Peak/Current – 20% Low Point - 11% Recession WHY?? LOCAL STATISTICS

9. LOCAL STATISTICS

10. LOCAL STATISTICS

11. LOCAL STATISTICS

12. Annual Absorption & Construction for past 10 years • In peak years, the Industrial market absorbs 750K-1 million SF per year • In 2006, there was more product built than the next 7 years combined! LOCAL STATISTICS

13. Annual Absorption & Construction for past 10 years • In peak years, the Office market absorbs 300K-400K SF per year • If market absorbed 200K/yr it would take 6 years to stabilize to 12% Vacancy LOCAL STATISTICS

14. ABQ’s industrial vacancy stacks up well to competing regional markets • ABQ has less SF per capita than many competing cities. • Denver and Salt Lake City are larger distribution hubs Regional Comparison(Industrial)

15. Although ABQ’s vacancy is high, it is comparable to PHX and Las Vegas. • PHX currently has 26 million SF of vacant space • ABQ has let SF per capita than competing markets likely due to high govt influence. Regional Comparison(Office)

16. Industrial Overview • Jim Smith, SIOR • CBRE 16

17. National versus local trends • Largest industrial transactions over the last 8 quarters • Market activity by industry and decision drivers • Forecast Albuquerque Industrial Market

18. National versus Local Trends (Tenant perspective)

19. National versus Local Trends(Landlord perspective)

20. Largest Industrial TransactionsQ4 2011 – Q3 2013

21. NORTH I-25 5 Locations of largest industrial transactions WEST MESA 3 SOUTH I-25 2

22. What sort of activity is driving Albuquerque industrial market?

23. Warehousing of retail and consumer goods • Retail third party logistics providers, Pepsi Bottling, Admiral Beverage, US Food • What drives location decisions? • 24’+ ceiling height • ESFR (Early Suppression, Fast Response) fire sprinklers • trailer parking • Two of three user built new facilities Market Activity

24. 16’ clear height, not sprinkled

25. 28’ clear height withESFR fire sprinklers

26. Trailer parking

27. Oil and gas • Transportation – pipeline • Pipeline companies have generated construction work. • Some engineering company activity related to oil and gas industry • Opportunity is related new technologies (fracking) which have made extraction of resources viable. • What drives location decision? • Storage requirement and term Market Activity

28. Cell tower construction: • Activity driven by new technologies and required hardware/infrastructure upgrade. • Construction work of limited duration. • What drives location decisions? • Storage requirement and term Market Activity

29. Owner user activity has been positively affected by low interest rates, but as interest rates uncertainty continues will users become less optimistic about purchasing? • There is limited and shrinking availability of class A inventory (constructed post-2000, 24’+ clear height with ESFR fire sprinkler systems). • Cost of new class A facilities will likely see asking lease rates 20% above current market asking rates? • Construction activity to remain below 10-year average for the next 18 months • Annual rent growth 3-4% - above inflation Forecast

30. Availability of adequate wet utilities in south I-25 corridor and far west side may limit options for quick development. • Will there be downward pressure on land prices to make development affordable? • Lack of rail service in Albuquerque. What might disrupt the path forward?

31. Office Market Overview Tom Jenkins, SIOR Real Estate Advisors 31

33. Triplicate CONTRACT DocuSign

34. Excel Spreadsheet HP12C Calculator

35. Pager Payphone Pocket full of quarters..

36. WattsLine Skype, Face Time, WebEx, Go-To-Meeting

38. Quality Pre-1985 • Multi-Story Atrium Lobbies • Granite Flooring and Counters in Common Areas • Water Features • Substantial Window Lines and Views • Large Offices

39. Quality Today • Function • Efficient use of space • Infrastructure • Lower operating costs • Higher density

40. Impact of Higher Density 300 People 500 People

41. PRIVATE OFFICES OPEN FLOOR PLAN

42. Total Office Inventory14.1 Million Square Feet Quality Office InventoryGreater Density & After 1985 3.6 Million Square Feet

43. Largest Office TransactionsQ4 2011 – Q3 2013

44. Vacancy and Rental Rate (Smoothed)

45. Time on Market

46. Selection of ABQ

47. CANON’S SEARCH FOR “QUALITY” OFFICE BUILDINGS 7401 Snaproll 4411 The 25 Way 4400 Masthead 4041 Jefferson Plz 5700 W University 4500 Alexander Blvd

48. MOLINA HEALTHCARE BLUE CROSS BLUE SHIELD CANON GAP UNIVERSITY OF NM AVAILABLE

49. What Could Be? • “The new office will offer improved infrastructure to better accommodate the needs of our employees and business,” Gap spokeswoman Avery Vaught.

50. What Could Be?