Brokerage Outlook: Delaware

• Delaware Retail

• Delaware Industrial

• Delaware Office

Delaware Retail Famous Submitted by Brandon Famous, founder and CEO of the Conshohocken, Pennsylvania, office of Fameco Real Estate. Posted 3-13-06. What area is your expertise? • Fameco's market area encompasses Delaware, eastern and central Pennsylvania, and southern New Jersey. What trends do you see presently in retail development in your area? • Delaware is experiencing limited retail development, and while new development has been slowed by stringent zoning restrictions along with DelDOT constraints, there are some proposed projects in the pipeline. Among those proposed projects, there is a mix of shopping center types. Seeds have been planted for quasi-lifestyle projects, but development of this type does lag behind the Philadelphia and Baltimore/Washington, D.C. markets. Conversely, areas such as Middletown and Rehoboth continue to show signs of development activity. What type of retail center is doing well in your area? • Unlike southeastern Pennsylvnia and southern New Jersey, which have a number of new developments coming online, due to stringent zoning restrictions, commercial development does not occur at the same brisk pace in Delaware as in these other regions. For the most part, new retail development in Delaware consists of traditional power centers. What type of retailer is doing well in your area? • Currently, discount department stores are having tremendous success throughout the Delaware Valley as evidenced by numerous new store openings and strong existing store sales. Discount department stores like Kohl's and Wal-Mart have aggressive expansion plans in the region. Home improvement centers like The Home Depot continue to have allure amongst consumers and hence continue to fill the market with little sign of a slowdown. Generally speaking, retailers do well in Delaware due to the tax differential between it and the surrounding states, high employment rates and limited square footage per capita. What retailers are new to your area? • We are excited that a number of new retailers are entering our market. Anna's Linens has just announced its roll out in the region. Other prominent retailers evaluating the market for entry include Lane Furniture, LA Fitness, Harris Teeter and Golf Galaxy. Who are the active retail developers in your area? • Louis Capano & Sons, Allied Properties, Kimco Realty Corporation, Stoltz Real Estate Partners, Fusco Enterprises and Bellevue Properties. Please name one or two significant retail developments in your area. What impact will these projects have on the market? • Center Pointe Plaza Phase II is a 189,000-square-foot, shadow-anchored Home Depot Center in Christiana, Delaware. This center is being developed by Louis Capano & Sons. Opening is expected in fall 2006. Phase II lease signings include PetsMart, Golf Galaxy, Olive Garden and Red Lobster. Where is the majority of development taking place? Why is this area doing well? • Much of the new development is taking place in Middletown, Delaware. This is due to several reasons, including strong residential growth; the opening 2 years ago of DE Route 1, positioning Middletown as a bedroom community easily accessible to Dover, Newark and Wilmington; the availability of sewer capacity; and the willingness of municipal authorities to encourage both residential and commercial development. What area do you expect to be the next big retail development market? Why? • Middletown has been and will continue to be the area where most development is concentrated. Please describe the retail leasing activity in your area. • Generally speaking, leasing activity remains strong, particularly in the primary corridors. Over the past 3 years, Fameco has maintained its high level of activity of more than 400 leases annually throughout the Delaware Valley, which places us squarely amongst the retail brokerage firm leaders in the region. What major leases have been closed recently? Wal-Mart Super Center — 204,167 square feet, Camden Town Center, Camden Lowe's Home Improvement Warehouse — 140,000 square feet, Camden Town Center, Camden (sale) Lowe's Home Improvement Warehouse — 140,000 square feet, Route 273, Newark The Home Depot — 130,000 square feet, Miller Road, Wilmington BJ's Wholesale Club — 114,000 square feet, Pencader Plaza, Newark Please give a measure of retail vacancy rates. Please give a measure of available sublease space. • The vacancy rate in Class A retail space is less than 10 percent in this region. There are no specific calculations for sublease space, though it is clear that there has been an escalation in sublease availabilities resulting from the recent retailer consolidations and bankruptcies. What types of retailers should look into your market in the coming year? What type of retail is needed? • All types of retail have had success in Delaware. The expectation is for the same in the year ahead. There is still a dearth of specialty retailers in this region. Presumably this condition will change in the not-too-distant future. Would you like to make any additional observations about the retail market in your area? • Though the Philadelphia demographic market area is the fifth-largest metropolitan area nationally, it is still underserved and underdeveloped from a retail perspective. Fameco projects that development will continue for at least the next 5-7 years. This favorable environment presents tremendous opportunities for existing and new retailers to capture market share in the region.

Delaware Industrial Brown Submitted by Charles Brown, vice president with the Wilmington, Delaware, office of Grubb & Ellis Company. Posted 12-27-05. What area is your expertise? • Northern New Castle County, Delaware. What trends do you see presently in industrial development in your area? • Lack of land available for industrial development, which has limited new development activity. The Northern New Castle Industrial market remains active in the end-user sales market, as the historically low cost of capital has enticed users to own rather than lease. What type of industrial product is doing well in your area? • The standard product is a moderate clear height (20-26 feet) warehouse/distribution product. Leasing demand continues to be fair, supported by end-users requiring space for local distribution. Who are the active industrial developers in your area? • The Mattei Corporation and Harvey Development are two of the more active industrial developers in northern Delaware. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • The Mattei Corporation is completing leasing on a recent 190,000-square-foot site on Executive Drive in the Pencader Corporate Center. Mattei has the adjacent pad site ready for a 160,000-square-foot building. Harvey Development has a 400,000-square-foot pad site ready in the Twin Spans Business Park. What area do you expect to be the next big industrial development market? Why? • The next area for new development could be sites in lower New Castle County below the canal and near Route 1. The lack of land in northern New Castle County may force development here despite the added highway distance. Please describe the industrial leasing activity in your area. • The vertical markets and industries having the most significant impact on the Northern Delaware Industrial market include automotive, financial (back-office), light manufacturing and companies engaged in local distribution. • The market has more or less achieved equilibrium; rents have stabilized despite relatively small leasing activity due to the lack of new inventory planned or underway in the short term. Please describe the industrial sales activity in your area. • The industrial sales market has been brisk with 2005 setting new high water marks in terms of price per square foot, with one recent user sale at over $70/square foot. Again, relatively low interest rates, combined with the increasing cost of land and construction materials, are reflected in higher sales prices. 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 2006? • The spiraling costs of construction, lack of available land and the historically inexpensive cost of capital has driven up the prices of assets on the market. We expect cap rates to move more or less sideways in the year to come, as any reduction in demand attributed to increases in interest rates will be offset by a dearth of available land and high construction costs, which we see as relative constants in the short term.

Delaware Office Elliman Submitted by William Elliman, partner with the Wilmington, Delaware office of GVA Smith Mack. Posted 10-29-07. What area is your expertise? • New Castle County, which includes Wilmington’s Central Business District (CBD) and suburban office space markets. What trends do you see presently in office development in your area?  • The entire New Castle County office market totals 18.8 million square feet broken down as follows: Central Business District In a 6.5 million square feet CBD, the addition in the last 12 months of approximately 950,000 square feet of new office space will most likely keep any additional development on a hold pattern for one to three years. The new projects include: The Blue Cross/Blue Shield Building at 160,000 square feet; Barclays Bank Building at 280,000 square feet; The WSFS Financial Plaza at 371,000 square feet (with a 77 percent occupancy); and Renaissance Center (with a 15 percent occupancy). The DuPont pullout of 10 floors in downtown Wilmington added a large block of space to the CBD. CBD vacancy is 19.7 percent for Class A and 29.9 percent Class B. Northern New Castle County The northern market totals about 3.8 million square feet of office space with a vacancy rate of 18.9 percent. Basell leased 45,000 square feet at Delaware Corporate Center and Accenture leased 37,000 square feet at Rockwood Office Park. Unfortunately, Accenture’s lease does not come close to making up for the fact that it will be pulling out of 201,000 square feet at 1801 Augustine Cut-Off. Western New Castle County At 3.3 million square feet and a 7.8 percent vacancy rate, rents climbed. Premium space is non-existent. Significant changes have occurred in this market in recent months: DuPont sold their Barley Mill Plaza complex (34 buildings on 100 acres) for $90 million. Redevelopment of that site into multi-use office, retail and/or residential will occur over the next several years. The Commons at Little Falls signed a 26,000 square feet lease with Honda Financial and has started construction of an 85,000 square feet spec building. MBNA’s acquisition by Bank of America put the former Columbia Gas Building (138,000 square feet with 125,000 square feet vacant) into the market. Construction of the new Artisan’s Bank Headquarters is nearing completion (60,000 square feet with a remaining 8,000 square feet vacancy). Southern New Castle County This is a market of 3.2 million square feet with a 15.35 percent vacancy factor. Bank of America vacated 300 Wakefield Drive (120,000 square feet). However, the property was only empty for six months because Comcast swooped in and leased the entire building. The Crozier Center formerly owned by MBNA has been acquired by Buccini Pollin. Renamed Iron Hill Corporate Center, this 450,000 square feet office complex is now being redeveloped and marketed with Bank of America leasing back 85,000 square feet of office space. Who are the active office developers in your area? • Brandywine Realty Trust, Buccini-Pollin Group, Stoltz and Trefoil Properties. Please name one or two significant office developments in your area. What impact will these projects have on the market? 85,000 square feet of speculative office space is under construction at The Commons at Little Falls. The sale by DuPont of their Barley Mill Plaza complex. This is 34-year-old 70’s style office buildings on a 100- acres campus in the Greenville market. Greenville is traditionally, very upscale and commands high rents.  Redevelopment of that site into multi-use office, retail and/or residential over the next several years will have a significant impact on that sub-market on the western side of Wilmington. The Commons at Little Falls signed a 26,000 square feet lease with Honda Financial and has started construction of an 85,000 square feet spec building. They can also build additional 118,000 square feet building on the site with an additional 60,000 square feet to be built adjacent to the site. Where is the majority of development taking place? Why is this area doing well? Development is occurring in the CBD and along the waterfront. The Western Submarket has seen the most development because of its low vacancy rate and dearth of Class A vacancy. As a result, the Commons at Little Falls is underway and Barley Mill Plaza will be developed in the next 3 to 5 years. In the CBD, the 500 Delaware Avenue project and the Renaissance Center have been constructed, almost at opposite ends of the CBD, one doing exceptionally well and one struggling for tenants. The waterfront of Wilmington has undergone a transformation over the last several years. Recently, several large residential projects have gone up, along with new office buildings and new projects in the pipeline. The construction of the Mid-Atlantic Headquarters of AAA and the development of two buildings for Juniper Bank (now Barclays) have changed the appearance of the water front area.  Restaurants and shopping along with a walking path have made a significant impact on this City. What area do you expect to be the next big development market? Why? • The Waterfront will continue to expand and develop. The other will be the Greenville area once the Barley Mill project takes shape. With a market of only 18.8 million square feet and a limited radius of 7 miles (12 to the outer areas of southern New Castle County), the continued development will be dependent upon the availability of land. Further development might well push more to the south into Kent County. What areas are doing well in terms of office leasing? Which areas are struggling with office leasing? • The overall market does not experience significant swings or areas that struggle. The impact on the real estate market is driven by a significant amount by the larger corporations acquisitions, downsizing and other corporate changes. For instance: Bank of America acquired MBNA (one of the largest employers in Delaware); DuPont realigned its activities, putting almost 500,000 square feet into the CBD market and sold 1 million square feet off Avon is closing its operations in Delaware in 2008 Sears is closing its center in 2009 General Motors is changing or downsizing is presence in the state Please give a measure of office vacancy rates. Please give a measure of available sublease. • The most significant blocks of sublease space are as follows: Uniqema Sublease in New Castle with the entire 59,000 square feet building available The CSC sublease in Newark with approximately 76,000 square feet available The Hercules sublease in the CBD with over 100,000 square feet available Vacancy percentages by submarket are discussed above 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? • The current interest rates have served to tighten the landlord’s willingness to “buy” deals — there is a perception of more scrutiny and slimmer margins in deals, but nothing that is overt at this time. What is the status of job growth/(un)employment rates and what bearing will it have on the office market? • The availability of a trained workforce recently downsized by Bank of America gave Comcast great confidence to come into Delaware and find a ready supply of labor. An emerging biotechnology market has all brought new talent and is developing a new resource for talent. 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? • Financial Services has been the largest absorber of space in the past and we expect this trend to continue. Would you like to make any additional observations about the office market in your area? • Wilmington is almost a boutique market.  It cannot be considered a suburb of Philadelphia, although it lies just 20 miles south of Philadelphia and is significantly closer mileage wise than many Philadelphia suburban markets.  It’s overall location, size and business-friendly climate remain stable.