Art Kerckhoff

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THE OFFICE MARKET

• Art Kerckhoff

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OFFICE OVERVIEW

• 2008 Review
• Selected Submarket Review
• Major Transactions
• New Construction
• Recessions Historic Impact on Office Market
• Forecast for 2009

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SELECTED SUBMARKET REVIEW

• Absorption Vacancy A B
• Total STL Market 766,000 SF 11.7
• West County 383,000 SF 9
• Clayton 118,000 SF 8
• Downtown (114,000) SF 21

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MAJOR TRANSACTIONS 2008

• Company Size Net Absorption
• Monsanto 254,000 SF 254,000 SF
• Express Scripts 181,000 SF 40,000 SF
• Elsevier 150,000 SF 50,000 SF
• Enterprise Rent-A-Car 123,000 SF --
• BJC 100,000 SF 100,000 SF
• Memco Barge/Abengoa 84,000 SF 20,000 SF
• US Bank 82,000 SF 82,000 SF
• Furniture Brands 53,000 SF 20,000 SF
• CMS 50,000 SF 10,000 SF
• Total 1.1 Million SF 577,000 SF

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2008 SPECULATIVE CONSTRUCTION
Lakeside Crossing I 127,000 SF Total 100 Leased
to Monsanto
Central Park Square 101,000 SF 95 Leased to
Memco Barge/Abengoa
825 Maryville Center 76,000 SF Total 60 Leased
to JW Terril/Ameriprise
TOTAL 88 LEASED
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2008 BUILD-TO-SUIT
Express Scripts 181,000 SF Total 100 Leased
Safety National 138,000 SF 100 Leased
Highland Plaza III 87,000 SF Total 100 Leased
TOTAL 100 LEASED
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2009 SPECULATIVE CONSTRUCTION
Meridian 175,000 SF Total 51 Leased
Progress Point 122,700 SF Total 100 Leased
TOTAL 71 LEASED
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2009 BUILD-TO-SUIT
Lakeside Crossing II 127,000 SF Total 100 Leased
Highlands Plaza II 64,000 SF 94 Leased
TOTAL 98 LEASED
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2009
?
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RECESSION COMPARISON
1,400,000
1,300,000
3,300,000
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LACK OF DEVELOPABLE SITES
Sachs
Highway 141
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CREDIT MARKETS
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DEVELOPER RESTRAINT
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COMPANIES
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ADVICE TO LANDLORDS

• Occupancy is Paramount
• Time is Your Enemy
• Creativity Flexibility are Essential

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ADVICE TO TENANTS

• Credit is King
• Efficiency is Critical
• Perception is NOT Reality

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2009 FORECAST

• 2008 2009
• Vacancy Rate 11.7 12.7

Absorption 766,000 150,000
Sublease Availability 423,000
725,000
Rental Rates
5-10
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THE INDUSTRIAL MARKET
Ed Lampitt
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Perception vs. Reality
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HISTORICAL VACANCY
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DEMOLITION
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HISTORICAL VACANCY
7.1
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2008 ABSORPTION
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MO vs. IL ABSORPTION
Metro East 1,700,000 SF
1,700,000
(360,000)
St. Louis (360,000)
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SPECULATIVE DEVELOPMENT
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Industrial Land Positions
835 Acres
485 Acres
880 Acres
2,200 Total Acres
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TRENDS

• Incentives/Abatements
• Consolidation
• Slow 2009
• Increase in Sublease Space
• Increase in Renewals
• User Flexibility

Outlook
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THE INVESTMENT MARKET
Paul Hilton
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End of Irrational Exuberance
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NATIONAL SALES VOLUME
In Millions
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WHAT HAPPENED?

• Credit Crunch
• Economic Recession
• Stock Market Collapse

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THE CREDIT CRUNCH
A CLOSER LOOK

• Insurance Companies and Pension Funds
• Banks Savings Loans
• Mezzanine Lenders
• Commercial Mortgage Backed Securities (CMBS)

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U.S. CMBS ISSUANCE
(in billions)
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U.S. CMBS Issuance
National Sales Volume
1995-2008
1995-2008
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WHERE ARE WE NOW?
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RETURN OF RISK PREMIUM

• Primary vs. Secondary
• Leased vs. Vacant
• Turnover
• A vs. B

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BACK TO THE BASICSLender

• Higher Spreads Higher Borrowing Costs
• Lower Loan to Value
• Strength of Borrower

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BACK TO THE BASICSInvestor

• Focus on Unleveraged Returns
• Conservative Underwriting
• Higher Required Returns

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AFFECT ON CAP RATES
Cap Rate
05-07 Now 05-07 Now
05-07 Now 05-07
Now
Multi-Family Industrial
Office Retail
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WHERE ARE WE GOING?

• Slow Start .Faster Finish
• Increased Foreclosure Activity
• Lenders Will Finance Their Own Foreclosures
• Package Sales of Distressed Assets

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2008 End of Irrational Exuberance

2009 Return of the Risk Premium
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