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Welcome to the 2008 NC-CCIM Triangle Market Forecast

Welcome to the 2008 NC-CCIM Triangle Market Forecast. Triangle Office Market Thomas “Skip” Hill, CCIM Vice President, Raleigh Highwoods Properties, Inc. Wall Street vs. Main Street.

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Welcome to the 2008 NC-CCIM Triangle Market Forecast

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  1. Welcome to the 2008 NC-CCIM Triangle Market Forecast

  2. Triangle Office Market Thomas “Skip” Hill, CCIM Vice President, Raleigh Highwoods Properties, Inc.

  3. Wall Street vs. Main Street “What became clear after only a few sessions was a marked difference from the doom and gloom we hear about to what is actually happening at property level. A large number of CEO’s, across all property types and the world, have not yet seen a significant slowdown or marked decrease in rents or occupancies. The CEO’s are likely describing what they are seeing and however, the reality is that weaker conditions are likely or the horizon.”

  4. Five Emerging Themes • Real estate fundamentals are not yet indicative of current economic uncertainty/weakness (national perspective) • Cap rate trajectory is unclear • Development has shifted from a source of growth to a source of risk • Valuations and the impact of financial services weakness remains uncertain • Liquidity is king

  5. Highwoods Triangle Division Office Profile • 5M SF owned, leased and managed • Over 500 tenants • Mixture of Class A/Class B properties • 91.5% HIW occupancy vs. 87.1% Triangle occupancy (as of 12/31/07) • Dispositions 1.2M SF +/- (2004 – present) • Development 900K SF +/- (2004 - present) • Joint venture and wholly-owned facilities • 200 acres land holdings (develop approx. 2M SF of office) • Selectively searching for acquisitions

  6. Skip’s Top Ten ExpectationsTriangle Office Market for 2008 • New office developments will slow, but not stop • Demand will slow, but will remain steady • Triangle will continue to enjoy regional recession “insulation” (not “immunity”) • Government and universities to have significant impact on real estate development • Rental rates remain flat in 2008 but increase in 2009-2010 • Free rent/concessions will continue throughout the year • New office developers less likely to enter Triangle • Continued trends for mixed-use/densification • “Wait and See” year with slow progress for Triangle • 1. Tar Heels take the Blue Devils in the finals of NCAA

  7. Triangle Industrial/Flex Market Ed Brown, CCIM, SIOR NAI Carolantic Realty

  8. The Triangle Industrial/Flex Market

  9. The Triangle Industrial/Flex Market

  10. Triangle Retail Market Vijay Shah, CCIM Rivercrest Realty Investors

  11. The Triangle Retail Market New Proposed Mixed-Use Centers

  12. The Triangle Retail Market

  13. The Triangle Retail Market Triangle Retail Supply and Demand Trends Triangle Retail Vacancy Trends Triangle Average Retail Rents by Submarket

  14. Triangle Multifamily Market Jim Scofield, SIOR JBMRA/Sperry Van Ness International

  15. The Triangle Apartment Market 90,878 Units Property Age Breakdown

  16. Apartment Operations Vacancy by Submarket Vacancy Concessions % Annual Rent Growth $9,600/Unit Average Annual Rent ($800/mo) $3,250/Unit Average Annual Expenses

  17. Completions Apartment Development 2007 Completions 2008 Under Construction & Planned Vacancy Concessions

  18. Apartment Investments Average CAP Rate Total Apartment Sales $/Unit National Averages

  19. INVESTMENTS • Salvatore “Sam” DiFranco, • CCIM, SIOR,CEA • The One Source for Commercial Real Estate

  20. Wanted: Value add, income producing, upside potential with credit tenants, under market rental rates in great locations? Instead of: Over priced, empty / partially leased, under performing junk….. There are not any fire sales for good commercial properties

  21. 2007 Record Yearfor Triangle Real Estate • Office • Multi Family • Retail • Industrial • Total • Increase of 49% over 2006 $ 977M $ 991M $ 620M $ 483M $ 3,071B

  22. 2008 Outlook • Debt market has changed the players • Supply and demand • Buyers’ capacity and sellers’ expectations to reset • Cap rates no longer compressing • 1031 / New administration? • More fundamental and less financial engineering

  23. Commercial Real Estate Fundamentals Still Healthy • Credit concerns rooted in the sub-prime residential problems • Commercial delinquencies < 1% • Cash and equity buyers will benefit • Foreign investors (4X) active in US • Quality, location and operations will dictate value

  24. STOP: Reading the newspapers STOP: Watching the business news START: Enjoying the resiliency of the Triangle market and all it has to offer UNDERSTAND CRE continues to outperform the stock market and remains an attractive investment vehicle due to its stability and opportunity for diversification

  25. Thank You!

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