Jim Dieter, SIOR Executive Managing Director Industrial Services, The Americas

1
THE DYNAMICS OF THENATIONAL INDUSTRIAL MARKET

• Jim Dieter, SIORExecutive Managing
  DirectorIndustrial Services, The Americas

2
Current State of the US Industrial Market
Supply Demand
Forecast
(sf X 1,000)
Source TWR Industrial Outlook XL
3
Current State of the U.S. Industrial Market
Supply Demand
Source TWR Industrial Outlook XL
4
Current State of the U.S. Industrial Market
Supply Demand
Source TWR Industrial Outlook XL
5
Historical Industrial Cap Rates
Source CBRE Investment Sales
Note Data represents year-end pricing and is not
an annual average.
6

• INDUSTRIAL
• TRENDS, QUOTES AND OBSERVATIONS

7
Industry Trends, Quotes and Observations

• Land in most markets is all but dead.
• Smaller DCs versus mega are in favor. Why?
• Shorter term leases from both landlords and
  occupiers. Why?
• I will tear up the lease, will blend and extend
  to retain our tenants.
• Brownfield sites that are close to
  transportation and the consumer are attractive to
  the developer.
• Focused inventory management and reduction is
  causing much of the decline in demand.

8
Industry Trends, Quotes and Observations

• Build-to-suit segment is very challenged. Why?
• Financing challenges/ capital restraints
• Non-competitive pricing versus existing
  buildings
• Tenant credit worthiness
• Landlord capability to deliver

9
Industry Trends, Quotes and Observations

• There are virtually no build-to-suit requests
  that do not ask for sustainable features.
• Reconfiguration of supply chains is driving much
  activity.
• Significant percentage of past absorption was big
  box retailers.
• Developers and REITs will need to sell assets at
  higher cap rates to raise capital.
• Industrial absorption relies heavily on the
  automobile, retail and housing sectors.

10
Industry Trends, Quotes and Observations

• Intermodals and the inland port markets have a
  bright future. What are some of those markets?
• Kansas City
• Columbus
• Dallas
• Memphis
• Chicago

11
Industry Trends, Quotes and Observations

• Reducing all in occupancy costs is most
  important today, far beyond just rent.
• I am the user in the market, and how nice it is
  to be in the drivers seat during negotiations!
• Smaller emerging markets are facing deeper
  challenges for the short term. However over the
  midterm, remain very attractive. Why, and who are
  some of these the markets?
• Downward pressure on rents and sales prices is
  causing a flight to quality effect.
• Former high growth population markets are facing
  past core characteristics of an emerging market.

12
Industry Trends, Quotes and Observations

• My cost of shipping containers here from China
  just keeps going up!
• From an Italian manufacturer I cannot afford
  not to manufacture in the U.S. It is where my
  customers are.
• Manufacturing will and is coming back to the
  U.S. and Mexico.
• A service provider who will and can paint a
  picture of the road ahead will be valued most.
• Our goal is to lease or own the least amount of
  space and distribute the most amount of product.
  If successful we win.

13
Industry Trends, Quotes and Observations

• Brokers/ service providers are being asked to
  sign confidentiality agreements.
• Our labor analysts and economic incentive groups
  are most active.
• Opportunities abound for low leverage/ cash
  buyers.
• Most major projects are on hold.

14
Industrial Market Outlook

• 09 will remain challenging
• Late 2010 will likely see recovery because
• Credit markets are likely to stabilize.
• Consumers are getting over shock and will regain
  confidence.
• Improved efficiencies and inventory controls
  will begin to payoff, improving profits.
• FDI will recover with vigor in the U.S.
• Manufacturing will begin, as it already has, to
  come back to North America.
• Trade volumes should begin to recover, thus
  improving market conditions in both seaport and
  inland port markets.
• The strong and resilient who got through 09
  will be well positioned to grow, expand and
  increase market share in 2010.