Brokerage Outlook: Alabama


• Birmingham Retail

• Birmingham Industrial

• Huntsville Industrial

• Birmingham Office

Birmingham Retail Graham Submitted by Emris Graham, Jr., vice president with EGS Commercial Real Estate in Birmingham, Ala. Posted 02/06/08. What area is your expertise? • Birmingham Retail Market What trends do you see presently in retail development in your area? • Retail development continues to be driven by discount anchors and grocery stores. What type of retail product is doing well in your area? • Of note, fourth quarter saw most retail absorption take place in neighborhood retail properties. Also, a new Wal-Mart Supercenter opened in the Eastern/Irondale submarket. All retail is doing well in our market with occupancy at approximately 91.2 percent. What retailers are new to your area? • ALOC Grocery is new to the market along with several smaller national chain stores. Who are the active retail developers in your area? • Colonial Properties Trust has done the most retail development in the past several years. Please name one or two significant retail developments in your area. What impact will these projects have on the market? • Colonial Promenade in Fultondale, located in the Northern submarket, opened in Fall 2007 — Target, Best Buy and Books-A-Million • Colonial Promenade in Alabaster, located in the Highway 31 south submarket, Phase II opened in August 2007 — Target, JCPenney and Best Buy • The Grove in Hoover, located in the Hoover/Riverchase submarket, planned for 2009 — Target, Books-A-Million, Lowe’s Home Improvement Warehouse and Kohl’s Also significant is the addition of Nordstrom at the Riverchase Galleria in 2012. Where is the majority of development taking place? Why is this area doing well? • The majority of new development is taking place south of the city near the areas of residential growth. What area do you expect to be the next big retail development market? Why? • I think we will see development and redevelopment of infill sites in suburban communities south of Birmingham. This development will allow retailers to tap into already mature markets. Please describe the retail leasing activity in your area. • Leasing activity has been very active during 2007 mainly due to new development. What types of retailers should look into your market in the coming year? What type of retail is needed? • I think we will continue to see the addition of major discount stores and junior anchors in newly developed centers. Would you like to make any additional observations about the retail market in your area? • While the slow down in housing affects the retail market, the overall market is very healthy.

Birmingham Industrial Byers Submitted by Mark Byers, SIOR, senior vice president with EGS Commercial Real Estate in Birmingham, Ala. Posted 02/07/08. What office are you based in? • Birmingham, Ala. What area is your expertise? • Birmingham Industrial Market What trends do you see presently in industrial development in your area? • Presently, some geographic areas of our market are soft. Primarily some of the bulk distribution markets located on the perimeter of Birmingham are experiencing a softness that our market has not seen in recent history. This softness is associated with the construction of new buildings which the market has not yet absorbed. What type of industrial product is doing well in your area? • Office warehouse product is currently 91.1 percent leased. It is a very tight market with all submarkets in Birmingham experiencing the same kind of high levels of occupancy. Who are the active industrial developers in your area? • There are different partnerships developing industrial product in the Birmingham market with either EGS Commercial Real Estate or Graham and Company leading the partnerships. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • The most recently completed developments in our area have occurred in the Southern submarket. Shelby West and Shelby Commerce Park, IV are each significant developments (approximately 250,000 square feet each) which added product to a relatively new submarket. This development activity is causing more users to focus on this market as an alternate location for their distribution facility. Where is the majority of development taking place? Why is this area doing well? • The majority of the development is taking place around the southern perimeter of Birmingham. The Interstate 459 southern loop and the distribution of the population are a few reasons these locations are seeing development. Also, the availability of developable sites has been an important part of where the construction activity is taking place. What area do you expect to be the next big industrial development market? Why?  • The same perimeter areas are likely to continue to have development activity once the softness, which some of these markets are experiencing, disappears. The Alabaster/Calera area, the Moody area and the Bessemer/McCalla area are all well located and positioned for future growth. Please describe the industrial leasing activity in your area. • Leasing activity for the Birmingham Industrial market in 2007 has been due almost entirely to organic growth chiefly generated through relocation within the region and the expansion of existing operations, reflecting a strong local economy. Outside interest in the Birmingham market remains high. Second- and third-tier automotive suppliers, data centers, and biomedical research companies continue to demonstrate interest in Birmingham as the area economy maintains its broad-based growth. Please describe the industrial sales activity in your area. • Sales in the area are healthy. There is generally limited availability of quality warehouse and distribution buildings which are available in the marketplace to purchase. Sales prices seem to have risen as the limited availability of these buildings and the cost to construct a warehouse building has increased. Please give a measure of industrial vacancy rates and a measure of available sublease space. • Central Market – 8.8 percent • Eastern Market – 16.4 percent • Oxmoor Valley Market – 7.0 percent • Southern Market – 11.3 percent • Southwestern Market – 36.9 percent • Overall vacancy rate for the Birmingham market is 13.8 percent. What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year? • Rates have affected the investment market more than they have affected the sale of industrial buildings in Birmingham. Overall, the economists are predicting a significant slowdown in the market for 2008. If a recession occurs, certainly the momentum in industrial would slow. However, one of the advantages to a market like Birmingham is that our economy is relatively stable and doesn’t experience the boom and bust cycle which many larger markets experience. What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected? • The automotive sector will continue to absorb space as Alabama and the Southeast continue to attract suppliers from the North. Otherwise, organic growth in multiple industry sectors will account for absorption in our market.

Huntsville Industrial Wilke Submitted by Jeff Wilke, vice president with the Huntsville, Alabama office of Graham & Co. Posted 11-06-07. What area is your expertise? • Huntsville, Ala. What trends do you see presently in industrial development in your area? • Speculative construction in the 50,000 to 200,000-square-foot range What type of industrial product is doing well in your area? • 5,000 to 10,000-square-foot buildings Who are the active industrial developers in your area? • Industrial Properties of the South, Triad Development and Graham & Co. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • Graham & Co. developed a 208,000-square-foot warehouse in 2007 at 255 Short Pike Road. Triad Properties is developing a 102,000-square-foot flex building on New Loop Road across from the Huntsville Airport. Industrial Properties of the South has developed two 42,000-square-foot warehouses on Electronics Boulevard. This new speculative environment for industrial product has been a catalyst for local expansion, new business and new jobs. Where is the majority of development taking place? Why is this area doing well? • Huntsville Airport area – final parcels of Jetplex Industrial Park are being developed. What area do you expect to be the next big industrial development market? Why? • West Huntsville/Greenbrier exit. 5 miles from Interstate 65 Please describe the industrial leasing activity in your area. • Leasing has been strong for 5,000 to 15,000-square-foot space. Please describe the industrial sales activity in your area. • Several large sales took place in 2006, minimal in 2007. Please give a measure of industrial vacancy rates and a measure of available sublease space. • Vacancy is at 4 percent and will increase with new projects in development. What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year? • Investors are more cautious. Interest rates may go down, but it is harder to borrow money with increasing underwriting standards. What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected? • Automotive Would you like to make any additional observations about the industrial market in your area? • Industrial hit a growth period in mid-2006, along with office, retail and residential in response to positive BRAC news in Huntsville.

Birmingham Office Pradat Submitted by R. William Pradat, Jr., SIOR, executive vice president with EGS Commercial Real Estate in Birmingham, Ala. Posted 02/06/08. What area is your expertise? • Office brokerage and development, Birmingham, Ala. What trends do you see presently in office development in your area? • Class A buildings, but very little supply in 2008. Who are the active office developers in your area? • EGS Commercial Real Estate, Colonial Properties and Daniel Corporation Please name one or two significant office developments in your area. What impact will these projects have on the market? • Colonial Brookwood Center, developed by Colonial Properties and located adjacent to Colonial Brookwood Village. Completed in May 2007 and added 150,000 square feet of Class A space to the Midtown market. The building was 100 percent leased at the time of completion. Where is the majority of development taking place? Why is this area doing well? • The majority of development is taking place in the Midtown submarket, primarily because of its proximity to Birmingham’s upscale residential areas and its access to the Central Business District (CBD). What area do you expect to be the next big development market? Why? • Suburbs and the Midtown market What areas are doing well in terms of office leasing? Which areas are struggling with office leasing? • Midtown and Highway 280 are the tightest submarkets currently, both with occupancy rates at 97 percent. The CBD has seen some improvement in occupancy over the last year with the occupancy rate increasing from 84 percent in 2006 to 90 percent at the end of 2007. The lowest overall occupancy in the region remains the Hoover/Riverchase submarket with a rate of 84 percent with mostly older Class B inventory available. Please give a measure of office vacancy rates. Please give a measure of available sublease space. CBD — 90.6 percent Midtown — 96.6 percent 280/Southern — 96.3 percent Hoover Riverchase — 84.4 percent Vulcan/Oxmoor — 90.0 percent What impact do current interest rates have on the office market? What predictions do you have for interest rates and their effect on the office market in the next year? • Interest rates will decrease, which in turn should help development. What is the status of job growth/(un)employment rates and what bearing will it have on the office market? • A broad, diversified economy is the apparent driver in what is currently a very strong office market in Birmingham. As a result of increased demand, several new major office developments are currently in the planning stages, particularly in the extremely tight Midtown and 280/Southern submarkets. Is there any type of office tenant absorbing a majority of space? What industries do you expect to expand in the next year to absorb a great deal of office space? What areas will be affected? • The Birmingham office market has been driven by the bank merger creating a lot of opportunity – continue to see a growing number of law firms. Service industries (insurance, real estate, etc.) will also expand within the next year. Would you like to make any additional observations about the office market in your area? • Last year was the best year within the last 20 years for the Birmingham office market.