1. Society of Industrial and Office REALTORS® 1 SIOR New Mexico Chapter Industrial & Office Update

2. Society of Industrial and Office REALTORS® SIOR Market Update ✓ SIOR is the leading industrial and office real estate brokerage association. ✓ SIOR confers the SIOR designation to only the most knowledgeable, experienced, ethical, and successful commercial real estate brokerage specialists.

3. Society of Industrial and Office REALTORS® SIOR NM Chapter Members

4. Society of Industrial and Office REALTORS® THANK YOU SPONSORS!

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

6. Society of Industrial and Office REALTORS® LOCAL STATISTICS

7. Society of Industrial and Office REALTORS® LOCAL STATISTICS Recession Low Point - 5% Current- 9% Peak - 11%

8. Society of Industrial and Office REALTORS® LOCAL STATISTICS Recession Low Point - 11% Peak/Current – 20% WHY??

9. Society of Industrial and Office REALTORS® LOCAL STATISTICS

10. Society of Industrial and Office REALTORS® LOCAL STATISTICS

11. Society of Industrial and Office REALTORS® LOCAL STATISTICS

12. Society of Industrial and Office REALTORS® LOCAL STATISTICS 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!

13. Society of Industrial and Office REALTORS® LOCAL STATISTICS 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

14. Society of Industrial and Office REALTORS® Regional Comparison (Industrial) 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

15. Society of Industrial and Office REALTORS® Regional Comparison (Office) 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.

16. Society of Industrial and Office REALTORS® 16 Industrial Overview Jim Smith, SIOR CBRE

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

18. Society of Industrial and Office REALTORS® National versus Local Trends (Tenant perspective) National TrendsAlbuquerque Trends Concessions tightenDitto Less available spaceVaries by submarket, development type and age Multiple offers on same spaceSometimes, but infrequent e-commerce activity upNot here Spec development returns, but limited to top 5 markets Ha! Port volume up – retail sales remain strong Albuquerque has seen some consumer goods warehousing activity

19. Society of Industrial and Office REALTORS® National versus Local Trends (Landlord perspective) National TrendsAlbuquerque Trends Leasing volume to prerecession levels in most major markets Not yet Beginning to see rent growthMaybe in some cases Capital available for spec constructionNot yet Competition for space increasingInfrequently Landlords closely tracking housing market Yes Developers contemplate additional high cube space 36’+ Not here

20. Society of Industrial and Office REALTORS® Largest Industrial Transactions Q4 2011 – Q3 2013 SFOccupierAddressDate occupied 219,000Admiral Beverage3980 Prince St SEQ3 2013 133,000US Foods3700 Prince St SEQ4 2011 114,000Fidelitone Logistics801 Comanche Rd NEQ1 2012 109,000Vitality Works8500 Bluewater Rd NWQ1 2012 87,000Friedman Recycling5049 Edith Blvd. NEQ2 2013 45,901Bruckner Truck Sales 8101 Daytona NW Q4 2013 41,000SAMS Academy4100 Aerospace PkwyQ3 2012 40,800Durham School2401 Menaul Blvd NEQ1 2013 40,000Fed Ex Ground4525 Paseo del Norte NEQ4 2011 39,000Air Gas2929 Vassar Dr. NEQ4 2011

21. Society of Industrial and Office REALTORS® Locations of largest industrial transactions SOUTH I-25 2 NORTH I-25 5 WEST MESA 3

22. Society of Industrial and Office REALTORS® What sort of activity is driving Albuquerque industrial market?

23. Society of Industrial and Office REALTORS® Market Activity 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

24. Society of Industrial and Office REALTORS® 16’ clear height, not sprinkled

25. Society of Industrial and Office REALTORS® 28’ clear height with ESFR fire sprinklers

26. Society of Industrial and Office REALTORS® Trailer parking

27. Society of Industrial and Office REALTORS® Market Activity 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

28. Society of Industrial and Office REALTORS® Market Activity 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

29. Society of Industrial and Office REALTORS® Forecast 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

30. Society of Industrial and Office REALTORS® What might disrupt the path forward? 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.

31. Society of Industrial and Office REALTORS® 31 Office Market Overview Tom Jenkins, SIOR Real Estate Advisors

32. Society of Industrial and Office REALTORS®

33. Triplicate DocuSign CONTRACT

34. Society of Industrial and Office REALTORS® HP12C Calculator Excel Spreadsheet

35. Society of Industrial and Office REALTORS® Pager Pocket full of quarters.. Payphone

36. Society of Industrial and Office REALTORS® WattsLine Skype, Face Time, WebEx, Go-To-Meeting

37. Society of Industrial and Office REALTORS®

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. Society of Industrial and Office REALTORS® Quality Today Function Efficient use of space Infrastructure Lower operating costs Higher density

40. Society of Industrial and Office REALTORS® 300 People500 People Impact of Higher Density

41. Society of Industrial and Office REALTORS® PRIVATE OFFICESOPEN FLOOR PLAN

42. Society of Industrial and Office REALTORS® Total Office Inventory 14.1 Million Square Feet Quality Office Inventory Greater Density & After 1985 3.6 Million Square Feet

43. Society of Industrial and Office REALTORS® Largest Office Transactions Q4 2011 – Q3 2013 Square Footage OccupierAddressDate of Transaction 133,090Presbyterian (sale)9521 San MateoQ4 2011 84,724Blue Cross Blue Shield4411 The 25 WayQ3 2013 63,000Lowes6301 JeffersonQ4 2011 47,000Molina Health Care7401 SnaprollQ2 2013 37,478State of NM HSD1474 Rodeo RoadQ2 2013 33,682Canon4041 Jefferson PlaceQ3 2013 30,898Lowes Expansion6401 JeffersonQ2 2012 28,726Molina Health Care8801 Horizon WayQ1 2013 21,856Lovelace Healthcare7850 JeffersonQ1 2012 18,762Moss Adams6565 Americas ParkwayQ2 2013

44. Society of Industrial and Office REALTORS® Vacancy and Rental Rate (Smoothed)

45. Society of Industrial and Office REALTORS® Time on Market

46. Society of Industrial and Office REALTORS® Selection of ABQ

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

48. Society of Industrial and Office REALTORS® CANON GAP MOLINA HEALTHCARE UNIVERSITY OF NM AVAILABLE BLUE CROSS BLUE SHIELD

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

50. Society of Industrial and Office REALTORS® What Could Be?

51. Society of Industrial and Office REALTORS® Summary of Flight to Quality Office users will continue to migrate to “quality” office buildings Vacancy rates will continue to decrease in “quality” buildings Rental Rate Gap will increase between “quality” office buildings and Class C buildings. Redevelopment and repurposing of existing buildings There will be new substantial office buildings breaking ground

52. Society of Industrial and Office REALTORS® 52 Thank You & Happy Thanksgiving!