Brokerage Outlook: Idaho

• Treasure Valley Retail

• Boise Multifamily

• Boise Office

Treasure Valley Retail Wester Submitted by Josh Wester and Danny Wall, retail specialists with the Boise, Idaho, office of Grubb & Ellis|Idaho Commercial Group. Posted 2-22-06. What area is your expertise? • We focus on the Treasure Valley, which includes Boise, Meridian, Eagle, Nampa and Caldwell. What trends do you see presently in retail development in your area? • Net migration has accelerated new development of outlying residential communities, with most of the activity occurring west of Boise, resulting in expanded retail growth for 2006. Wall • The Boise retail market continued its unprecedented growth during the past 24 months. Drawn by steady job expansion and high quality of life factors, people continue to relocate to the Treasure Valley. Typical of rapid population growth, retail expansion has not kept pace with residential development, creating demand in 2006 for retail services throughout previously undeveloped areas. • Boise's population growth has gained the attention of many national retailers that previously paid little interest to the market. Existing retailer expansion and retailers entering the market for the first time combined for close to 200,000 square feet of positive net absorption. Leasing activity increased throughout 2005 and will continue in 2006, as retailers scramble to position themselves to service new and expanding areas of residential growth. Look for retailers to continue to follow the westward residential expansion well into 2007. • With the increase in retail leasing activity and expansion, developers will continue to add new product to the market. The Eagle Road corridor remains a hotspot in the market and will see the groundbreaking of several new centers in 2006. The Eagle and Ustick intersection is a particular hotspot with projects in various stages of development on all corners. Further north on Eagle Road, the Eagle River lifestyle center is expected to break ground in 2006. • Nampa has historically been an underserved retail market, and many developers are beginning to capitalize on the opportunity in this fast-growing community. Wal-Mart owns ground at the Garrity Interchange and is expected to break ground on both a Sam's Club and Wal-Mart Supercenter later in the year. Nampa's Karcher Interchange project is currently under construction as is a large Costco-anchored retail project north of the interchange. • While leasing activity and absorption are expected to remain strong throughout the Treasure Valley, vacancy rates may increase moderately, as new product is absorbed over the year. What type of retail product is doing well in your area? • Strongest demand is for anchored shop space in the area's new power centers. What retailers are new to your area? • Kohl's, Cabela's, Carrabba's Italian Grill, Tully's Coffee Who are the active retail developers in your area? • Developers Diversified Realty Corporation (DDR) and Kimco Realty Corporation have the two most sizeable projects under construction at this time. Locally based developers, including W.H. Moore Company, White Leasure, Hawkins Companies and Smith Brighton Properties, continue to be active in this market and outside of the state. Please name one or two significant retail developments in your area. What impact will these projects have on the market? • DDR recently broke ground on the Nampa Gateway project, which is a large open-air shopping center. Kimco began construction on the Treasure Valley Marketplace. Both projects are expected to open near year's end. Nampa Gateway is rumored to have JC Penney as a tenant. Treasure Valley Marketplace will be occupied by Costco, Target, Best Buy, Old Navy and others. These are the largest retail projects in the Treasure Valley and are significant in that they are both west of Boise in Nampa. They are the first projects of their size in the Nampa area and will provide residents in Canyon County much needed retail services. It remains to be seen whether the presence of more national retailers in Nampa will significantly affect retailers in neighboring Boise, where residents of Nampa have shopped in the past. Where is the majority of development taking place? Why is this area doing well? • Most of the development is in the western side of the Treasure Valley. Most significant developments are the aforementioned projects in Nampa and several projects along Eagle Road in west Boise/Meridian. The Eagle Road corridor has been popular because of the population growth in Meridian, Eagle and west Boise. This area also enjoys a strong income demographic, and Eagle Road is a main arterial. Nampa is doing well due to increasing population and a historically underserved retail market. What area do you expect to be the next big retail development market? Why? • The Interstate 84/10 Mile Road interchange in Meridian will be a strong development area once the interchange is complete. As the population of Eagle grows, it will become more and more attractive to retailers. Many have already recognized the strength of the Eagle market because of its high median household income (around $75,000). Please describe the retail leasing activity in your area. • Leasing activity has been strong in 2005 and is expected to remain strong through 2006. What major leases have been closed recently? • Cabela's recently announced a new 132,000-square-foot store in Franklin Towne Plaza, near the Boise Towne Square mall. • Kohl's will open a 96,000-square-foot store on the northwest corner of Eagle and Ustick roads this year. • As a whole, banks have been very active in the area and have signed a number of leases in the last year. Please give a measure of retail vacancy rates. • Retail vacancy rates are hovering around 9 percent in Boise and the surrounding areas. What types of retailers should look into your market in the coming year? What type of retail is needed? • National retailers that are not yet in Boise would do well to take a careful look at this market. We are seeing a large influx of growth from out of state, and many of those people arrive with disposable income and are accustomed to shopping at certain retailers who are net yet in this market.

Boise Multifamily Mickelson Submitted by Heidi Mickelson, Senior Advisor, with the Boise, Idaho, office of Sperry Van Ness. Posted 12-12-05. What area is your expertise? · I primarily focus on Boise, but work in all markets in Southern Idaho (Twin Falls, Idaho Falls, Pocatello, etc.). What trends do you see presently in multifamily development in your area? · There has been a significant increase in the amount of urban condominium development in the Boise downtown core, with more than 300 units in six projects either in the planning or early construction stages. Outside of the downtown core, there has been very little development activity either in apartments or condominiums. However, there has been a flood of four-plex development and single-family residential subdivisions. Who are the active multifamily developers in your area? · Local developers are developing all of the urban condo projects currently planned. Historically, there has not been any dominant developer in this market for multifamily, and that continues to be the case. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? · David Southers recently developed Hyde Park Place, a highly successful condo project in the desirable North End area of Boise. The project proved the demand existed for condo living near the downtown core. He is now planning an 88-unit condo project on the western edge of downtown Boise. The project is called Park Place and it will contribute to the growing number of people living and working in downtown Boise. · Another local developer, Bill Clark, is in the planning stages on several downtown condo projects. The Jefferson, a 40-unit structure just east of downtown Boise, had 27 of the 40 units reserved in the first week of marketing. In addition, Clark is developing a condo complex south of downtown overlooking one of the major parks on the Boise River, as well as a multi-story condominium building in the downtown core. Both projects are in the conceptual stages. In 2004, Clark completed a highly successful downtown condo project called the Veltex Building. Again, these projects are proving the desirability of living downtown and are helping to create a vibrant, lively, pedestrian downtown area. Where is the majority of development taking place? Why is this area doing well? · Most of the multifamily development is occurring downtown in condo projects because there is strong demand for housing that provides easy access to the businesses, restaurants and cultural opportunities that downtown Boise offers. What area do you expect to be the next big development market? Why? · The next big development area is likely to be in the Western Treasure Valley. At this point, there are numerous large single-family residential developments being built in these markets, but as land prices rise and the availability of land near the central core in the towns of Meridian, Eagle and Nampa/Caldwell diminishes, multifamily demand will rise. What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing? · Due to the availability of affordable single-family homes and the low interest rates, the entire apartment market is struggling. However, vacancies have been dropping in recent months and the general consensus is that the market is starting to recover. Please give a measure of apartment vacancy rates. · The most recent survey indicates that the apartment vacancy in Ada County (where Boise is located) is 6.8 percent. One-bedroom apartments have the lowest average vacancy at 5.8 percent, two-bedroom apartments are at 7 percent and three-bedroom units are at 8.7 percent. Please give a measure of condo sales activity in the area. · As mentioned above, downtown Boise condo sales are strong and are attracting additional development. There has not been much condo development in other areas of the market. What impact do current interest rates have on the apartment and condo markets? What predictions do you have for interest rates and their effect on the multifamily market in 2006? · The low interest rates available during the last few years have had a very negative impact on the apartment market, as it has been easier for renters to purchase either single-family homes or condos. As interest rates increase, the apartment market will improve, and we are already seeing the impact of recent interest rate increases with the average vacancy in the market dropping in recent months. What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market? · The unemployment rate in Boise is well below the national average and job growth is strong -- both are factors that will help improve the multifamily market.

Boise Office Cooper Submitted by Jackson Cooper, CCIM, SIOR, senior advisor with the Boise, Idaho, office of Sperry Van Ness, and Bill Beck, SIOR, with Tenant Realty Advisors in Boise. Posted 12-12-05. What area is your expertise? · We have expertise in the greater Boise Area office building market, which includes the cities of Boise, Eagle, Garden City, Meridian, Caldwell and Nampa - the so-called Treasure Valley - in Idaho. Beck What trends do you see presently in office development in your area? · Current trends in office market development are ongoing spec office building construction in the submarkets of Meridian, Eagle, and the downtown Boise Financial District. Meridian, Idaho, is within easy access of Idaho's capital city of Boise, located just 10 miles southwest. The Meridian area is likely to continue to attract tenants who want a central county location with access to labor and new housing construction. Companies attracted to the area include call centers, residential developers, mortgage companies and residential brokerage companies. Most, if not all, of the new buildings in the area are single-story concrete tilt-ups with surface parking.      Eagle, Idaho, is located 10 miles west of downtown Boise and borders Garden City to the southeast and Meridian to the south. New office construction in Eagle is aimed at high-end users which tend to be image- or presentation-oriented. Eagle's more available executive housing has attracted many corporate decision-makers.      Downtown Boise thrives as plans for "BoDo," a new mixed-use revitalization development of 350,000 square feet, nears full completion. Located on 7 acres in the heart of the cultural district, this $60 million private development will add new shopping, entertainment, office and hotel options to the downtown area. Having attracted national retail chains to the project, about one-third of the development is complete and open to the public and the remainder is slated for completion by March 2006. Already indications are it will be a popular destination for area residents. The rest of the downtown area has other significant high-rise office building development under way and/or planned. Who are the active office developers in your area? · The most active and large office building developers in the Boise market are The Sundance Company; the W.H. Moore Company; Eagle River Development; Brighton Corporation; and the Christensen Corporation. Please name one or two significant office developments in your area. What impact will these projects have on the market? · The Boise market is currently engaged in some significant office development. In the Meridian area, two highly experienced developers, The Sundance Company and the W.H. Moore Company, are building two business park campuses, one across from the other. The total acreage for the project is in excess of 250 acres. Between these two developers and these two projects, a new office submarket has been created. The location offers employers access to a wide labor market and more affordably priced housing. However, surface street congestion is somewhat problematic as traffic growth has nearly overwhelmed the transportation infrastructure, and this is something under consideration for other developers who might contemplate future projects for the area. With hundreds of acres in the area as yet undeveloped, traffic problems may reduce the area's appeal.      In the heart of downtown Boise, the Banner Bank Building is an 11-story, 180,000-square-foot spec office building scheduled for completion in March 2006. This project will effectively change how tenants, investors and developers view office buildings. Developed by The Christensen Corporation, this "green" office building, which follows LEED certification guidelines, is incorporating new building systems which will reduce operating expenses by an estimated 40 percent and includes a process to recapture rainwater for use in the building's lavatories and an electrical system that will allow people to keep working during a power failure. It may be the Pacific Northwest's and the West Coast's first "spec" office building to achieve a LEED Platinum Level certification.      The Banner Bank Building could have a significant impact upon other building owners as they rush to catch up to retrofit and re-engineer older, less energy-efficient buildings currently in the downtown core. Where is the majority of development taking place? Why is this area doing well? · The majority of office building development is occurring in the Meridian, Eagle, and downtown Boise areas. What area do you expect to be the next big development market? Why? · There is no single area that is expected to become the epicenter of new development. In our office market, the areas described will continue to grow - but for different reasons. What areas are doing well in terms of office leasing? Which areas are struggling with office leasing? · In terms of office leasing, Meridian, Eagle, and downtown Boise are doing well. There does not seem to be an area in the greater Boise office market that is struggling with office leasing, a sign of Boise's booming economy. Please give a measure of office vacancy rates. Please give a measure of available sublease space. · At mid-year 2005, throughout the Treasure Valley, vacancy rates were declining in nearly every submarket. Downtown Boise outperformed the rest of the Treasure Valley with an overall vacancy rate at 10.45 percent. The regional vacancy rate for Class A inventory was below 9 percent. Net absorption in the downtown area is still good and has remained fairly constant throughout the past year.      Conversely, at mid-year 2005 the Eagle and Meridian areas - both experiencing explosive growth - had the highest vacancy rates at 23.54 percent and 24.11 percent, respectively. It is anticipated that the vacancy rates in both of these areas will decline as the Treasure Valley continues to attract new businesses to the area and the population epicenter moves west of Eagle. 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 2006? · Office development continues at a relatively brisk pace even though interest rates have risen slightly. Perhaps this is because many of the larger local developers are building for cash, thus circumventing the need for an interest-bearing loan. Additionally, former office tenants are pursuing a trend toward purchasing their own buildings rather than continuing to lease space. This is driven, in part, by low interest rates and the appeal of self-ownership. Consequently, smaller free-standing office buildings are now in higher demand. The combination of population growth and steady interest rates is reason to anticipate a continued expansion of the office market. What is the status of job growth/(un)employment rates and what bearing will it have on the office market? · According to the Idaho Department of Commerce and Labor's most recent publication, the labor force continues to expand throughout Idaho. From July 2004 to July 2005, the rate of job growth was 5.2 percent compared to the national average of 1.7 percent. Service industries, construction, and retail sectors have experienced growth for the last 5 years. According to Nancy Vannorsdel, president of the Boise Metro Chamber of Commerce, the area is facing a labor shortage in many areas, but particularly in the technical and professional occupations. An inability to hire qualified candidates may reduce demand for new office space - this remains to be seen. Is there any type of office tenant absorbing a majority of space? What industries do you expect to expand in 2006 to absorb a great deal of office space? What areas will be affected? · The Eagle and Meridian submarkets are extremely active for back-office personnel-intensive companies, which have absorbed the majority of newly developed office space. Would you like to make any additional observations about the office market in your area? · The greater Boise area has not yet seen its wave or spike of spec office building construction, probably for two reasons:      Local lenders have restricted loans for spec construction that is not pre-leased. Therefore, unless a developer is well financed and has the ability to build for cash, projects are difficult to bring out of the ground.      The Treasure Valley development community is relatively thin. Well-financed and large developers and companies are in short supply, thus there is little competition for construction of spec projects.