Brokerage Outlook: Iowa

• Metro Des Moines Retail

• Central Iowa Industrial

• Central Iowa Multifamily

• Iowa Office

Metro Des Moines Retail Knapp Submitted by John Knapp, a partner with the West Des Moines, Iowa, office of Iowa Realty Commercial/CORFAC International. Posted 3-16-06. What area is your expertise? • the greater Des Moines metropolitan area What type of retail product is doing well in your area? • Retail in the metro area has been very strong for the last 24 months. The Des Moines metro area as a whole has been helped by the strong retail developments in the western, northern and eastern suburban markets. What retailers are new to your area? • With the new General Growth Properties-developed Jordan Creek Town Center Mall in West Des Moines, we have seen Dillard's, Costco, Scheels, Williams-Sonoma and Pottery Barn, along with many fine national and regional retailers, enter our market in the last 24 months. Who are the active retail developers in your area? • General Growth Properties and Buyers Realty are the active retail developers in our area. Please name one or two significant retail developments in your area. What impact will these projects have on the market? • The largest and most significant retail development in the metro area is General Growth's Jordan Creek Town Center. The town center is located at the intersection of Jordan Creek and Mills Civic parkways in West Des Moines. The development includes more than 2 million square feet within its boundaries and has had a dramatic effect on new retail and office development in the immediate area. Where is the majority of development taking place? Why is this area doing well? • The majority of retail development has taken place around Jordan Creek Town Center. Galleria at Jordan Creek is an 840,000-square-foot, upscale community shopping center that is under construction on Mills Civic Parkway. West Glen Town Center located on Mills Civic Parkway is home to many new and existing metro area retailers. When complete, the mixed-use project will span more than 1 million square feet on 75 acres, offering retail, office and residential space. A new proposed 357,000-square-foot mixed-use development in the area is Village at Ponderosa. Wells Fargo Home Mortgage is an office anchor to this area with a 200-acre campus that will accommodate 2 million square feet and 12,000-15,000 employees when fully built out. What area do you expect to be the next big retail development market? Why? • The next retail market to develop will be in the northwest corner of the metro area. The cities of Urbandale, Grimes and Waukee are areas of substantial residential growth with limited retail development. Please describe the retail leasing activity in your area. • The retail leasing in the metro area has been strong due to the retail developments described above and the big box development in the communities surrounding the metro area. What major leases have been closed recently? • The Galleria at Jordan Creek located on Mills Civic Parkway will be home to T.J. Maxx with a 30,000-square-foot store, Staples with a 20,000-square-foot store and Super Wal-Mart with a more than 200,000-square-foot store. Please give a measure of retail vacancy rates. • The metro Des Moines area has seen strong retail demand during the last 24 months. Vacancy within the growth areas is in the 5-10 percent range due to new construction. Existing neighborhood and community centers are seeing vacancy in the range of 0-10 percent with many centers enjoying 100 percent occupancy. We do have pockets in some areas of town experiencing higher vacancy rates, but they are isolated areas.

Central Iowa Industrial Pitts Submitted by Marcus Pitts, sales associate with the West Des Moines, Iowa, office of CB Richard Ellis/Hubbell Commercial. Posted 4-7-06. What area is your expertise? • I specialize in the leasing, sale and development of industrial opportunities in the greater Des Moines/central Iowa market. What trends do you see presently in industrial development in your area? • Currently we are seeing more and more users wanting to own their own facilities. This is due to the still-low interest rates providing "affordable" capital for companies. This has led to a high demand for the acquisition and disposition of both vacant and partially occupied industrial properties in the market. What type of industrial product is doing well in your area? • Activity on high-cube warehouse space is picking up. We are starting to see more users for this product in the market leading to more opportunities for both development and brokerage alike. Who are the active industrial developers in your area? • Hubbell Realty Company has brought several industrial parks online throughout the greater Des Moines metro area in the last 3 years. Other active industrial developers include R & R Realty and The Denny Elwell Companies. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • Grimes Business Park is a 65-acre industrial/mixed-use development located at the junction of Southwest 11th Street and Highway 141 in Grimes. Boasting a central location with quick access to Interstate 80/35, Grimes Business Park features lots for sale, build-to-suit opportunities, future space for lease and industrial tax abatement. This business park is a strategic location for office, flex, light industrial and retail businesses. • Broadway Business Park is a 73-acre industrial park located between Des Moines and Altoona with great access and visibility directly off the Highway 65 Bypass and minutes from Interstate 80. Excellent access makes the park an ideal location for a distribution center, office/warehouse or the light industrial user. In addition, for-sale or build-to-suit lots with an industrial tax abatement are available. Where is the majority of development taking place? Why is this area doing well? • The northwest and east sectors of the markets are primed for growth with great interstate and rail accessibility. These sectors are also offering an industrial tax abatement program on improvements to help spur development. This, coupled with affordable capital, should help to promote industrial development in these areas for many years to come. What area do you expect to be the next big industrial development market? Why? • Ankeny has infrastructure in place to become the next big office/industrial market. Please describe the industrial leasing activity in your area. • The leasing of industrial space in the market is beginning to pick up with the slight upward movement in interest rates. I look for the trend to continue as rates continue to rise and companies begin to see more benefit in the leasing of space as apposed to purchasing. Please describe the industrial sales activity in your area. • Right now is a great time for either acquisition or disposition in the central Iowa area. Not only are we seeing properties sell to the traditional owner/occupier or developer, but we are also seeing a surge of out-of-state capital coming from both the East and West coasts. These buyers are purchasing product at aggressive capitalization rates ranging from 6 to 8 percent and are moving quickly on single-tenant, net-leased and multi-tenant, triple-net-leased investments. Please give a measure of industrial vacancy rates. Please give a measure of available sublease space. • The 2006 warehouse inventory total in the greater Des Moines market is approximately 30 million square feet, up from approximately 29.1 million square feet in 2005. Warehouse occupancy rates are at 87.2 percent for 2006, up from 84.5 percent in 2005. The 2006 manufacturing inventory total in the greater Des Moines market is approximately 12.4 million square feet, down from approximately 13 million square feet in 2005. Manufacturing occupancy rates are at 96.9 percent for 2006, up from 93.6 percent in 2005.

Central Iowa Multifamily Krause Submitted by Rick Krause, senior associate with the Des Moines, Iowa, office of Iowa Realty Commercial/CORFAC International. Posted 3-17-06. What area is your expertise? • My area of expertise is in the sale of income-producing property in central Iowa. I mainly focus on the sale of multifamily rental property. Most of my answers refer to the market for apartments, not condominiums. I talk about condos as they relate to the multifamily market only from the standpoint of someone's purchasing an apartment property with the intention of converting it to condominiums. What trends do you see presently in multifamily development in your area? • The pace of new development has slowed dramatically in recent years. • In 2001 and 2002, we saw a more than 10 percent increase of new units in the metropolitan Des Moines market. This was spurred by low interest rates. Combined with poor job growth, a shrinking tenant pool and low interest rates, we had economic vacancy of close to 15 percent. In the past 2 years we have been able to absorb most of this vacancy. I expect to see minimal new apartment development in this market. We will see continued increased occupancy along with some rent inflation, which we have not seen in this market for the past 3 years. Who are the active multifamily developers in your area? • Active multifamily developers in the Des Moines market are Regency Homes out of Des Moines; Richdale Group out of Omaha, Nebraska; and Perry Associates out of Lincoln, Nebraska. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? • One development that currently is under construction is the West Glen Development, which is a mixed-use project offering retail space, office space, and condos and apartments. Although this concept has had a lot of success across the country, it is new to the Des Moines market. Apartments in this development have just become available for leasing. At this time, 61 units have been developed with the hope of an additional 200+ units during the next couple of years. These high-end apartments offer underground parking and a full list of amenities. The units will lease from $1,000 per month for a one-bedroom to $1,300 per month for a two-bedroom. The success of these units will determine if Des Moines has an appetite for high-end apartment rentals; also, the success or failure of this development will determine if other investors will build this type of product. • Another new development in this area is a 144-unit luxury apartment project being built in West Des Moines by Perry Associates. The project will go by the name of Mansions at Jordan Creek. This will add to the existing inventory of high-end apartments in the western suburbs. This is the first major development in this market in the last couple of years. This product is similar to other types of multifamily housing typical in this area. The leasing activity at this project will be watched closely by other developers to determine the market's level of saturation. Where is the majority of development taking place? Why is this area doing well? • Most of the major development is taking place in either the western suburbs, where a lot of job growth is taking place; at a new 1 million-square-foot mall, which opened in West Des Moines in August 2004; and in downtown Des Moines, which, much like other downtown markets across the country, has seen a resurgence of housing options. What area do you expect to be the next big development market? Why? • The next area of development for multifamily housing will be in the western and southwestern suburbs of Des Moines. There is plenty of land available with the new highway infrastructure that was recently completed in this area. What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing? • Overall, occupancy in the apartment market throughout the Des Moines area will improve. Areas hit hardest will be those with older inventory that does not have the amenities that tenants expect today. The western suburbs and downtown Des Moines offer options that are not available throughout the Des Moines area. Please give a measure of apartment vacancy rates. • The typical vacancy rate in the Des Moines market is close to 7 percent. In the last few years, vacancy rates have fluctuated more quickly. Turnover has increased dramatically because it has been a tenants' market with lots of offered incentives. Please give a measure of condo sales activity in the area. • As interest rates rise, I expect to see a reduction in condo development activity in the Des Moines market. Many condo buyers who purchased their condominiums with very little money down are going to be hard-pressed to liquidate their condos. Many of these low-end condominiums are coming on the secondary market and are not listed with real estate agents because the sellers cannot afford to pay the commissions. Many of these first-time homeowners were lured in by low down payments and principal and interest payments that initially were lower then rents. As their jobs and lives change, they are having a need to liquidate these properties, and since interest rates have risen, the prospects for selling these properties for more than their purchase price is very difficult. 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? • Interest rates in the apartment market will initially lower the values of apartment property investments but in the long run will benefit apartment property owners. The rate hikes will increase the tenant pool, which has been reduced in recent years due to low interest rates. This will increase occupancy, with the effect being higher rental rates within 9-12 months. What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market? • Job growth in the Des Moines metropolitan area has been very strong during the past 18 months. Wells Fargo has built a new 900,000-square-foot office facility in West Des Moines for its mortgage division. This development will bring 2,000-5,000 new jobs in West Des Moines during the next 5 years. Wells Fargo also added 280,000 square feet of office space in downtown Des Moines and plans to hire an additional 1,000 employees at that location. Nationwide Insurance is building a new office building in downtown Des Moines and plans to hire an additional 1,250 employees during the next 3 years. Citigroup just completed a 179,000-square-foot office facility in Urbandale and plans on hiring more than 1,000 new employees. The insurance and financial services sector continues to drive the Des Moines economy. This job growth will fuel the multifamily market in Des Moines. It will increase occupancy, drive up rental rates and should add to the need for additional multifamily development in this market.

Iowa Office Crowley Submitted by Kevin Crowley, assistant manager with the West Des Moines, Iowa, office of Iowa Realty Commercial/CORFAC International. Posted 3-15-06. What area is your expertise? • My area of expertise is office and industrial brokerage throughout the state of Iowa. What trends do you see presently in office development in your area? • There is more than 300,000 square feet of new construction, most of which is speculative development. Who are the active office developers in your area? • R&R Realty Group, LADCO Development, Regency Commercial, Brad Johnson Development and Hubbell Realty. Please name one or two significant office developments in your area. What impact will these projects have on the market? • LADCO's Village of Ponderosa, scheduled for completion in 2007, will create a mixed-use lifestyle. R&R Investors developed Country Club, which includes five buildings totaling 165,000 square feet with potential for more than 200,000 square feet. Where is the majority of development taking place? Why is this area doing well? • The majority of development is in West Des Moines in the Jordan Creek development corridor. The area has easy access from Interstates 35 and 80. What area do you expect to be the next big development market? Why? • While West Des Moines continues to thrive, Ankeny and Urbandale have positioned themselves with infrastructure and access for major growth in the next 24 to 60 months. What areas are doing well in terms of office leasing? Which areas are struggling with office leasing? • West Des Moines and downtown remain viable with single-digit Class A vacancy. The Class B market seems to be in the lower teens with vacancy. Please give a measure of office vacancy rates. Please give a measure of available sublease space. • Downtown Des Moines' vacancy rate is approximately 13 percent. Des Moines' suburban vacancy rate is 8 percent or less. Sublease space in Des Moines has been leased or run out of term in the last 12 months. What is the status of job growth/(un)employment rates and what bearing will it have on the office market? • Our unemployment rate is currently 4 percent. The labor market is competitive, and we are seeing major growth in the financial service sector. 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? • Financial services and insurance growth continue to drive our market with new and existing projects. Would you like to make any additional observations about the office market in your area? • Wells Fargo Mortgage, Wells Fargo Financial and Allied continue to expand in our central business district and suburban markets.