Atlanta The more than two-year trend of negative absorption in Atlanta was extended into first quarter 2010 as the market gave back nearly 1.3 million square feet of industrial occupancy. However, much of this loss was concentrated in the Northeast submarket, and many other submarkets are beginning to show noticeable signs of growth. The trend of downsizing and vacating significant blocks of space may now be ending. If the market can build on recent momentum, rents may begin ticking upward by year-end. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/AtlantaResearch_Publications.aspx 493722436 0.141 0.19 -1497323 3.26 -0.033 1140000 0 Austin Declines in market fundamentals are now beginning to level off in the Austin industrial sector. However, the losses to the hi-tech, R&D and manufacturing industries around the region likely mean full and meaningful recovery will be several years away, as the market slowly re-absorbs the excess capacity and higher levels of vacancy brought about from downsizings, consolidations, tenant inertia and company exits from Austin. Further declines in 2010 pricing are helping some companies take advantage of cost savings in the near-term, and improvements in local job and population growth will support longer range optimism. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Austin-Research.aspx 51697617 0.132 0.147 -102254 5.38 -0.064 0 337200 Baltimore / Washington DC The Baltimore / Washington, D.C. industrial market experienced mixed fundamentals in the first quarter. Direct and total vacancy both dipped slightly to 10.6 and 11.3 percent, respectively. Asking rents, on the other hand, continued to fall and were down 5.5 percent year-over-year. The area continued to fare better than the nation as a whole, however, with federal spending helping sustain and revitalize the local economy. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/WashingtonDCResearch_Publications.aspx 267140584 0.113 0.159 824302 5.83 -0.055 567969 252414 Boston Slight gains in occupancy levels were recorded during the first quarter, helping to ensure that availability and vacancy remain flat. Competition amongst landlords for tenants will continue to be fierce, with many owners dropping rents to historically low levels to secure leases. There were four deals over 150,000 square feet transacted during the quarter, and five others in the market. While tour activity has picked up noticeably, it is not expected to translate into significant deals being consummated in the near future. Leasing activity will consist primarily of renewals and some smaller expansions. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Boston-Research-Portal.aspx 300335992 0.116 0.188 -195964 5.14 -0.059 0 112500 Broward County The industrial market remained sluggish at the end of first quarter 2010. Although no significant improvements occurred during the period, there were indicators that point toward stabilization. Demand slightly outpaced the supply of available space, which contributed to modest positive absorption and helped vacancy rates remain unchanged. Only slight fluctuations in demand will remain as stabilization is expected to continue, with recovery likely to be seen toward the first half of 2011. 85088963 0.103 0.133 245418 6.72 -0.138 0 0 Central New Jersey A “hangover effect” brought reduced leasing activity in the first quarter of 2010. After experiencing a 145 percent increase in leasing activity from the third quarter of 2009 to the fourth quarter, the first three months of 2010 experienced a “hangover” and lost momentum, resulting in a negative 52 percent quarter-over-quarter pullback. Despite this loss in market velocity, the gap between effective rents and expectations has closed, as modest pricing corrections continue in asking rental rates. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/New-Jersey-Research-Publications.aspx 315661373 0.112 0.162 -1136809 4.9 -0.096 195300 130000 Central Valley Sprouts of growth are returning to what remains a stagnant market. Total activity levels have moved slightly higher during the quarter compared to the first quarter of last year, as existing users have gained enough confidence to pursue space repositioning. Much healing, however, is still needed in the region in order to return to better and sustained health. Landlords are competitively pursuing tenants and are willing to make significant concessions to attract them. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/NorthernCaliforniaResearchPublications.aspx 72536438 0.209 0.246 -223604 3.6 -0.167 0 0 Charlotte Spurred on by slightly improving market conditions, there was an increase in leasing activity during the quarter, including signed leases of over 100,000 square feet by Atlas Copco, Husqvarna and Pax Industries, as well as sizable subleases by Cadmus and Constar. Even though vacancy is showing signs of stabilization, rental rates have accelerated their declines. http://www.us.am.joneslanglasalle.com/UnitedStates/EN-US/Pages/Charlotte-Research.aspx 218767178 0.147 0.212 -257543 3.24 -0.097 149400 0 Chicago At the end of the first quarter, the base of Chicago available inventory experienced a considerable increase to 172.5 million square feet, up nearly 20.0 million square feet from the first quarter 2009. This surge was a direct result of some larger facilities returning to the marketplace. Additionally, inertia continued as leasing activity was down 40.5 percent for the first quarter 2010 as compared to first quarter 2009, while the amount of sublease available space increased almost 20 percent. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Chicago-Research.aspx 1100237735 0.127 0.157 -3745625 4.32 -0.077 281078 523400 Cincinnati The Cincinnati industrial market continues to be weak; however, the quarter saw an increase in activity from tenants testing the market. Vacancy rates are showing signs of stabilization, aided by a complete halt in speculative construction. Through the quarter, improvements were seen in the local purchasing index and other economic indicators. However, concern exists over the long term effects to the local economy of the significant reductions made by Delta Airlines in their hub operations at CVG. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Cincinnati-Research.aspx 327962853 0.096 0.139 -538783 3.14 -0.068 63000 45000 Cleveland Cleveland’s industrial vacancy dropped in the first quarter for the first time in 18 months to 8.9 percent. New construction is not happening due to the continued availability of inexpensive alternatives and a shortage of capital. The south suburban markets and the Northwest submarkets lead activity levels in the region, while competition continues to drive pricing with the gap between asking and taking shrinking slightly. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Cleveland-Research.aspx 389267879 0.089 0.143 -837259 3.17 -0.039 0 0 Columbus As with much of the country, a sense of optimism has entered the Central Ohio market. The past patterns of deteriorating economic conditions, expiring tax abatements and previous speculative development have begun to make way for positive absorption. Tenants continue to see favorable concessions as many developers would like to stabilize their existing inventory and best prepare for an anticipated 2011 recovery. Several large tenants have entered the market or relocated, which has provided increased activity and a potential shift toward build-to-suits. 224166660 0.124 0.167 67649 2.82 -0.041 0 97000 Dallas An increase in leasing activity, combined with limited new construction, is expected to push the vacancy rate down as the year progresses. Average asking rents actually edged up to $3.66 per square foot, but this increase was largely attributed to some cheaper blocks of space being leased up, as opposed to landlords raising their rates. A number of large lease transactions resulted in the second consecutive quarter of positive net absorption. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Dallas_Publications.aspx 509025268 0.123 0.174 344443 3.66 -0.005 933352 603250 Denver Overall demand and activity picked up slightly during the first quarter due to a renewed sense of optimism, although cautious, in the local market. Vacancy ended the quarter at just over 8.0 percent and is expected to stabilize over the course of 2010 due to the large number of leases signed during the first three months of the year. A controlled pipeline of new supply is also helping to keep vacancy low. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/DenverResearch_Publications.aspx 158914290 0.08 0.138 369630 4.66 -0.073 678000 0 Detroit The Detroit industrial market has not changed its color much over the past year and certainly not in the first quarter of 2010. The unemployment rate continues to increase and is at an unprecedented 14.5 percent. Tenant demand for industrial space is at an all time low. Tenants continue to look to reduce their real estate spend and are reluctant to sign long-term commitments. Detroit was the first market hit hard by the economic downturn and automotive recession, and will likely be the last to recover. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Detroit-Research.aspx 414933726 0.141 0.206 -1300673 3.97 -0.075 68629 0 Greensboro / Winston-Salem The quarter experienced strong leasing activity of more than 1.2 million square feet, though this was primarily from the Hanesbrands 930,451 square foot sale-leaseback. Rental rates, which declined 14.2 percent in 2009, have begun to stabilize slightly. The Greensboro / Winston-Salem area, which failed to reap the economic and employment gains of 2007, will continue to grapple with structural weakness over the mid-term recovery. However, the region’s concentration of mail distribution centers, as well as an abundance of attractively priced space opportunities, will continue to make the Triad a natural fit for a variety of tenants. 199396612 0.116 0.161 -141691 2.84 -0.093 380000 0 Houston End-user activity and economic conditions, combined with the effects of past speculative construction, suggest further negative impacts on the market. Sublease space will continue to accumulate and compete with direct space, and some defaults will occur, all of which will lead to additional downward pressure on rates. As more companies take advantage of competitive lease rates for newer, more functional space, second- and third-generation distribution space will surface. The impact of this phenomenon will be a gradual rise in vacancy accompanied by a drag on lease rates, as landlords of older product replace tenants at lower rates. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/HoustonResearch_Publications.aspx 368480190 0.063 0.103 857172 4.79 -0.095 533196 1218376 Indianapolis Occupancy is still critical to building owners. As such, concessions like free rent and ultra-low “introductory” rental rates are being offered to attract new tenants away from the competition. Renewals are also still very important as to not compete with other second- and third-generation space options. With continued positive absorption and a significant reduction in 2010 and 2011 lease rollovers via renewals, it is fair to say the market is much more stable than this period last year. http://www.us.am.joneslanglasalle.com/UnitedStates/EN-US/Pages/indianapolis-research.aspx 226976242 0.097 0.152 -2346 3.07 -0.016 340000 0 Inland Empire The Inland Empire region posted a third consecutive quarter of positive net absorption figures, just shy of one million square feet. Vacancy rates continued their downward trend, dropping from 12.2 to 12.0 percent quarter-over-quarter. Deal flow continues to be spurred by new leases as opposed to renewals, as has been the trend so far this year. Vacancy rates will improve even further and could see high single-digits by early 2011. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/SouthernCaliforniaResearchPublications.aspx 391264675 0.12 0.175 916567 3.96 -0.175 1656680 0 Kansas City In addition to the fact that the first quarter is traditionally the least active quarter, a move out of 455,000 square feet by Jarden skewed Kansas City’s industrial numbers. Fortunately, Jarden stayed in the area by moving in with sister company Coleman in their new 1.1 million square foot building. Meanwhile, tenant activity continues to increase with companies in the market considering larger facilities, while landlords are being more aggressive and realistic. Likewise, overall the market is more active and positive than it has been over the last 12 months. 218749656 0.067 0.104 -1156450 3.78 -0.143 50000 0 Los Angeles Vacancy in Los Angeles saw a mild increase quarter-over-quarter to 5.1 percent. While figures are historically high for the region, the market still remains relatively tight and well below the national average. For the second quarter in a row, no new construction broke ground. For a market that has averaged 2.5 million square feet of product under construction per quarter over the last five years, and 7.0 million square feet per quarter over the last 15 years, this represents a significant decrease. As a result, vacancy rates have remained in the low single-digits and rental rates now seem to have reached a plateau. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/SouthernCaliforniaResearchPublications.aspx 730414664 0.051 0.098 -3185859 6.36 -0.086 0 0 Memphis As the economy begins to rebound, Memphis is in a great position to experience a significant and quick turnaround due to it not only having the busiest cargo airport in the world, but also being home to five Class I railroads. It will continue to experience a tenant favorable environment for the next two quarters, but the market should tighten for large Class A space in the fourth quarter of 2010. 179959815 0.147 0.196 -193161 2.43 -0.054 0 0 Miami Current net absorption was the first positive quarterly posting of new occupancy in over two years. However, this was not enough to offset vacancy, which remained virtually unchanged from the previous two quarters. Overall leasing activity of 756,000 square feet was correspondingly down by over half of the volume posted at year-end 2009. In this tenant favorable market, the flight to quality will continue throughout the year as landlord concessions remain abundant. 155798241 0.112 0.149 239970 6.56 -0.093 170000 0 Minneapolis / St. Paul Tenants continue to exploit the market as they renew at reduced rates for increased concessions, a sign that landlords are willing to trade higher rates in order to keep their current tenants and avoid putting their space on the market to compete with significant sublease space and increasingly competitive landlords. The market will continue to “treadmill,” as space gets traded and those tenants who vacate or downsize are replaced by those growing or moving to take advantage of low rates and high concessions. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Minneapolis-Research.aspx 222630478 0.07 0.143 -535793 4.93 -0.099 0 0 Northern New Jersey In Northern New Jersey, historic availability rates continue with a vast concentration of space located in North Bergen and Secaucus. While economic conditions have played their part, much of this space has functional issues including limited loading, parking and deferred maintenance. Overall, while concessions are bottoming out, some landlords, such as REITs and institutional owners that were previously in cash preservation mode, are now boosting investment in tenant improvements. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/New-Jersey-Research-Publications.aspx 379684456 0.086 0.129 -652744 6.02 -0.067 12000 0 Oakland / East Bay The East Bay market, representing some of the highest-quality industrial space in the region, began to stabilize further during the quarter. Proximity to the Port of Oakland, paired with lower vacancies, has helped in keeping rental rates flat while the overall economy continues to search for its footing. The Fremont/Newark submarkets are poised to face a new set of challenges subsequent to closure of the NUMMI plant, keeping fundamentals weak through the remainder of the year. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/NorthernCaliforniaResearchPublications.aspx 130069334 0.11 0.159 -3553948 5.88 -0.02 609000 0 Orange County Vacancy rates continue to rise in Orange County and have nearly doubled from their cyclical low during fourth-quarter 2007 to their current rate of 6.7 percent. Weakened demand has led to a fifth consecutive quarter of negative net absorption, however, figures improved by nearly 50.0 percent year-over-year. Key indicators should turn positive by the second half of 2010. The County is expected to add jobs in 2010, and vacancy rates should peak around 8.0 percent. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/SouthernCaliforniaResearchPublications.aspx 110791139 0.067 0.119 -521718 6.96 -0.121 487000 0 Orlando Despite a 12.7 percent vacancy rate in its industrial market, Orlando began to experience encouraging signs of leasing activity. Although still negative, direct net absorption in the first quarter improved by about 26 percent from the first quarter of 2009. However, some of this leasing activity is the result of relocations within the market by tenants looking to take advantage of aggressive deal terms. Nonetheless, landlords are encouraged by this movement and have continued to offer concessions such as free rent and significantly reduced rental rates. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Orlando-Research.aspx 112842868 0.127 0.163 -253509 4.66 -0.116 0 0 Palm Beach Demand barely outpaced supply as slight positive absorption kept vacancy rates rising for the 14th consecutive quarter. Although growth in the industrial sector can be described as lackluster, it is a positive indicator that signs of stabilization are beginning. Continued gains in consumer spending will aid the industrial sector as companies find the need for more supply and demand for warehouse and distribution space increases. 34158741 0.13 0.102 43726 7.14 -0.147 0 0 Philadelphia Market activity remained steady through the first quarter as a handful of sizable deals in the market transacted, including Masterbrands, DDS and Corning Life Sciences. Tenants continued to take advantage of below market rents as landlords worked to increase occupancy levels across their portfolios. The Pennsylvania market continues to maintain its high level of resilience among large users that choose to expand or consolidate within the region. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/PhiladelphiaResearchPublications.aspx 787368029 0.102 0.147 2220416 4.01 -0.052 0 133683 Phoenix With vacancy rates at their highest since the mid-1980s, negative absorption, almost non-existent construction activity and significant downward pressure on rental rates, it is expected to take several years for the Phoenix industrial market to recover. However, tenant activity, along with completed transactions, look as if they may be starting to turn a corner as tenants appear to be making decisions to capitalize on lower rental rates and abundant concessions. This trend is expected to carry on through the remainder of 2010. 196342281 0.167 0.202 -490247 5.52 -0.092 571792 782291 Pittsburgh-2 The major indices were relatively flat throughout the first quarter, with overall vacancy in the 9.0 percent range. The harsh winter had an impact on new inquiries and no major transactions were announced. Most activity centered on lease extensions or renewal options, which remained relatively high, in excess of 90.0 percent. Clearly, tenants are looking for concessions, although the marketplace hasn’t experienced major changes. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Pittsburgh-Research.aspx 110897672 0.09 0.141 128223 4.53 0.004 0 0 Portland The Wilsonville submarket has the largest relative vacancy at 21.0 percent, due to large vacancies at the former Rite-Aid and Nike distribution centers. Meanwhile, the Airport Way area remains healthy at 4.2 percent vacancy, but the big-box dominant Rivergate area saw an increase in vacancy to 11.1 percent. Other new vacancies include new downsizes or vacancies by Owens Corning at North Upland and Kerry Ingredients in Tualatin. However, overall Portland vacancy rates should continue to stabilize and decline for the next 6-12 months as most occupier contractions have already occurred and new deliveries have come to a standstill. 181145233 0.083 0.116 -406128 5.05 -0.061 520000 0 Richmond Even though market sentiment is beginning to see an uptick in the wake of flattening, if not slightly improving market fundamentals, landlords in the Richmond industrial sector continue to be aggressive with tenant concessions. This has helped spark some increased activity and is encouraging a sense that stabilization in the market is nearing. Additionally, as values have fallen over the last several years and as capital is beginning to come off the sidelines, activity has recently increased in the investment and user sales arenas to capitalize on costs savings. 84136395 0.109 0.136 17182 3.64 -0.076 0 0 Sacramento Industrial vacancy continued to rise, reaching 14.3 percent at the close of the quarter. As a result, rents have been under pressure with the increasing inventory and decreasing demand for space. For the majority of business, especially in the construction supply and materials distribution industries, reducing overhead has been the overwhelming theme. However, food storage, distribution and green energy-related businesses continued to perform well as the two industries experienced little change in demand during the recession. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/NorthernCaliforniaResearchPublications.aspx 73839871 0.143 0.213 -706474 4.2 -0.028 0 0 San Antonio The announcement of Sysco Corporation’s decision to build a new 635,000 square foot distribution facility was an important step in building momentum in the market. However, as a consolidation of its Round Rock and another Northeast San Antonio, its net effect will be minimized as Sysco will vacate its existing 330,000 square feet upon completion in late 2011. Overall, the market has experienced continued increasing vacancy in the first quarter, with demand insufficient to cover any other transaction activity or tenant movement, leading to further reductions in asking rents. 71574872 0.101 0.134 122976 4.5 -0.091 0 0 San Diego The industrial market in San Diego County appears to be at the bottom of the current cycle. After 57,000 square feet of positive net absorption in the first quarter, vacancy in industrial product diminished slightly from its 8.8 percent peak seen last quarter to 8.7 percent today. Though leasing activity in the first quarter came in slightly below that seen in the last quarter of 2009, activity within the large tenant arena grew substantially with many expanding firms looking for new space. Rents have rolled back to 2004-2005 levels. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/SouthernCaliforniaResearchPublications.aspx 148017940 0.087 0.124 57881 8.04 -0.095 0 121984 Seattle While vacancy rates could continue to rise over the next few quarters, many feel we are nearing the bottom of the cycle. Kent Valley has seen an increase in deal activity. The Kent Valley Flood Plain threat level has been reduced from a year ago. Tenants are emerging from their holding patterns and looking for ways to leverage the soft market. Many tenants are garnering significant concessions, including aggressive rents, rent abatement and tenant improvement dollars. A potential fix for The Howard Hanson Dam will alleviate the concerns for Kent Valley. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/Seattle-Research.aspx 226552305 0.077 0.11 -645281 5.5 -0.052 206644 90626 Silicon Valley / South Bay Minimal tenant leasing activity during the first quarter set the tone for stagnant conditions. However, this market continues to show signs of stability which will encourage tenants to start taking advantage of favorable leasing and purchase conditions. Three relatively large leases were transacted during the quarter, two renewals and one new lease. Asking rents were generally fl at and incentives remained available, mostly in the form of free rent as landlords are reluctant to make substantial tenant improvements. Both vacancy and availability were essentially unchanged, although rent levels edged down along with sale prices. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/NorthernCaliforniaResearchPublications.aspx 54274178 0.093 0.134 1067 7.08 -0.063 0 0 St. Louis During the next six months, the “‘blend and extend”’ market will continue, in particular in the 50 million-square-foot North St. Louis County submarket. Opportunity fund buyers are circling, but have yet to close a discounted deal on an investment-grade property. Vacancy is nominal in the Gateway/Lakeview Commerce Center modern bulk warehouse parks; however, it remains above 10.0 percent in Earth City, the region’s traditional bulk warehouse market, while Fenton has a vacancy in excess of 25.0 percent given the 2009 Chrysler closure. The local market is waiting to see Earth City start absorbing space as a sign of positive marketwide turnaround in 2010. The Fenton Market may take longer to settle as it repositions itself post-Chrysler. http://www.us.am.joneslanglasalle.com/unitedstates/en-us/pages/St-Louis-Research.aspx 221409454 0.114 0.111 -477747 3.77 -0.041 250000 50000 Tampa Vacancy rates across all sectors of the Tampa industrial market remained in the mid- to upper-teens in the first quarter of 2010. Direct vacancy has been on a steady increase since year end 2006, and the supply of available space is expected to continue to increase throughout this year. Additionally, leasing activity has been sluggish over the past several periods. In fact, net absorption has been negative in six of the last eight quarters. 146756424 0.119 0.145 -1279622 4.35 -0.154 0 0