Brokerage Outlook: Pennsylvania

• Philadelphia Retail

• Pittsburgh Retail

• Philadelphia Industrial

• Philadelphia Multifamily

• Pittsburgh Multifamily

• Philadelphia Office

• Pittsburgh Office

Philadelphia Retail Berk Mark D. Berk, managing director with Sperry Van Ness/Location333 Realty. Posted 06/12/07. What area is your expertise? • Philadelphia, the surrounding counties and Delaware. What trends do you see presently in retail development in your area? • With the scarcity of zoned retail, landowners are renovating and repositioning their existing centers. What type of retail product is doing well in your area? • Centers with destination retailers and a strong market mix, particularly with high-end retailers. What retailers are new to your area? • Local banks and several new restaurants are now expanding throughout the region. Who are the active retail developers in your area? • Berwind, Brandolini Properties, Wolfson-Verrichia Group and O’Neill Properties. Please name one or two significant retail developments in your area. What impact will these projects have on the market? • The recently completed Shoppes at Valley Square, is located in Warrington, Pa. (Bucks County). Developed by Metro Development and Grasso Holdings, the project comprises 415,000 square feet of mixed-use space featuring Wegmans, Borders Books & Music, Banana Republic, Ann Taylor and Chicos. The property is scheduled to open this fall. The 1.6 million square foot Worthington Urban Town Center in Malvern will consist of a 140,000-square-foot Wegmans developed by O’Neill. Both of these projects are major generators for their marketplace and will impact marginal centers. Where is the majority of development taking place? Why is this area doing well? • Montgomery County has been the most active development area, with the most completed square feet in 2006 including new developments along the Route 422 corridor in Upper Providence and Limerick. This area has seen an increase in population growth and job growth during the past several years. What area do you expect to be the next big retail development market? Why? • Chester County is poised for sustained growth due to its population expansion and high disposable income levels, which attract higher-end retailers. However, zoning procedures and entitlements are not easy to obtain, thereby slowing the process. Please describe the retail leasing activity in your area. • Leasing levels have been consistent per prior years with slight rental rate gains for neighborhood and community shopping centers. Please give a measure of retail vacancy rates and a measure of available sublease space. • In the Philadelphia metro area, rates have hovered around 6.7 percent for neighborhood and community centers, with power center vacancies averaging 5.8 percent. In Philadelphia County, there is approximately 511,000 square feet available (5 percent vacancy) comprising anchor and non-anchor space; Montgomery County has 719,000 square feet available (6.2 percent vacancy); Delaware County has 254,000 square feet available (5.5 percent vacancy); Chester County has 339,000 square feet available (4.7 percent vacancy) and Bucks County has 628,000 square feet available (6.6 percent vacancy). What types of retailers should look into your market in the coming year? What type of retail is needed? • Restaurant chains and boutique-type retailers are good generators. We continue to need a better mix of retailers in order to distinguish existing and planned developments. Would you like to make any additional observations about the retail market in your area? • Cap rates have continued to compress, and the product availability is limited resulting in a significant increase in price per square foot. There is pent-up demand among investors, especially for well-leased centers and/or centers that have upside potential in growth markets. Time constraints for approvals and rezoning procedures lengthen the process in the entire Philadelphia and Delaware markets. Zoned parcels can now take up to 2 years in New Castle County, Del. The scarcity of product in Delaware has continued to drive cap rates lower.

Pittsburgh Retail Submitted by James Yarish, director of retail leasing with the Pittsburgh, Pennsylvania, office of Langholz Wilson Ellis, Inc./CORFAC International. Posted 07/26/07. Yarish What area is your expertise? • The Pittsburgh and Western Pennsylvania market. What trends do you see presently in retail development in your area? • There continues to be steady retail growth and development in the market. What type of retail product is doing well in your area? • The highly visible and accessible small strip center development. What retailers are new to your area? • Expanding retailers in the Pittsburgh and Western Pennsylvania market include: LA Fitness, Trader Joe’s, Buffalo Wild Wings, Chipotle, Hobby Lobby, Shoe Carnival, SONIC, IHOP, Walgreens and First Watch. Who are the active retail developers in your area? • Walnut Capital, Premier Properties USA and Cedarwood Development are all active in our area. Please name one or two significant retail developments in your area. What impact will these projects have on the market? • One significant development in our area is The Foundry at South Strabane in Washington County, Washington, Pa. The project is easily accessible from Interstates 70 and 79 and Route 19 and is located approximately 30 miles south of Pittsburgh. Washington, Pa., is the county seat for Washington County, which is the second fastest growing county in Southwestern Pennsylvania in terms of population. The Foundry at South Strabane is being developed by Indianapolis-based Premier Properties USA and will contain approximately 600,000 square feet on 100 acres. The unique design consisting of interesting, folding and layered planes will create a unique atmosphere setting the project apart from others in the area. Architectural elements throughout the project include steel I-beams, C-channels, exposed rivets, and brick and glass reflect the industrial steel heritage of the surrounding area. The projects design will create a rich environmental experience within the project, which is further enhanced by the individual identities of the tenants including JC Penney, Bed Bath & Beyond, Circuit City, Ross Dress for Less, ULTA, Marshalls, Shoe Carnival plus numerous national and regional small-shop retailers. Where is the majority of development taking place? Why is this area doing well? • A majority of retail development in the Pittsburgh and Western Pennsylvania market is taking place in Cranberry Township, Pa., which is north of Pittsburgh in Butler County and easily accessible from I-79, Route 19 and the Pennsylvania Turnpike. Butler County is the fastest growing county in Southwestern Pennsylvania in terms of population. What area do you expect to be the next big retail development market? Why? • The next major market for retail development could be the City of Pittsburgh. Some of the suburban markets are reaching their limits for retail development and the city is experiencing a growth in residential development with several new apartment and condominium developments currently under construction and planned. There is a lack of retail in certain categories in the downtown area and the residential growth should trigger more retail development. Please describe the retail leasing activity in your area. The retail leasing activity in Pittsburgh and Western Pennsylvania market is currently steady as the market continues to grow. There are numerous new retail developments currently under construction and planned in the near future.

Philadelphia Industrial Green Submitted by Patrick Green, senior vice president with the Philadelphia office of CB Richard Ellis. Posted 4-27-06. What area is your expertise? • The markets that I will address are Philadelphia and Bucks and Delaware counties, Pennsylvania. What trends do you see presently in industrial development in your area? • The lack of developable industrial land is a common theme among these markets, as residential and retail developers have focused on the supply of industrial land and many times are willing to pay higher prices than industrial developers. This is pushing big box industrial development further beyond the metropolitan fringes and forcing developers to purchase older buildings to be rehabbed. What types of industrial product is doing well in your area? • All industrial products are doing well, not only in Philadelphia and Bucks and Delaware counties, but also in the entire Philadelphia metropolitan industrial market. Who are the active industrial developers in your area? • Some of the industrial developers in these markets are Opus East, First Industrial Realty Trust, PennDel and ProLogis. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • Gamesa Corporation, a Spanish wind-energy company is expanding its operations in Pennsylvania by investing $34 million to open three new modern manufacturing centers on 20 plus acres in Keystone Industrial Port Complex, formerly US Steel's Fairless Hills Works, in Bucks County. The three new advanced technology plants in Bucks County will create more than 300 new jobs. • The largest industrial project currently underway is ProLogis' fully leased, 936,000-square-foot, Class A warehouse, Quakertown Interchange Commerce Center, located in Bucks County and set to deliver in July. Fort James Corporation, an affiliate of Georgia Pacific Corporation, has signed an 8-year lease there. Where is the majority of development taking place? Why is this area doing well? • The majority of development is taking place in the Southern New Jersey market, which encompasses Burlington, Camden and Gloucester counties, and Bucks County, Pennsylvania. Available, developable land is the key factor in these markets. What area do you expect to be the next big industrial development market? Why? • Lehigh Valley is anticipated to be the next big industrial development market. Currently this market is expanding due to available land, demand and its strategic proximity to several markets. Please describe the industrial leasing activity in your area. • Bucks County continued to see a good amount of leasing activity in the first quarter; for example, David's Bridal leased 192,000 square feet at 100 Crossings Drive, and Anvil International leased 108,000 square feet at 2530 Pearl Buck Road. Please describe the industrial sales activity in your area. • The sales activity in these markets is strong; while lack of land is driving prices up, buildings are rarely on the market for long. For example, Capital Lease Funding purchased a warehouse distribution center at 2760 Red Lion Road for just more than $90.1 million, or $88.79 per square foot. The seller was Liberty Property Trust, and the building was only on the market for approximately 150 days. Please give a measure of industrial vacancy rates. Please give a measure of available sublease space. • For the first quarter, CB Richard Ellis reported a vacancy rate of 5.91 percent for Bucks County and an availability rate of 11.04 percent. Delaware County reported 11.39 percent for both the vacancy and availability rates, while Philadelphia County had a 6.99 percent vacancy rate and 7.83 percent availability rate. 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? • Interest rates are expected to increase slightly in 2006, but they will continue to have minimal effect on the industrial market. What industries do you expect to expand in 2006 to absorb a great deal of industrial space? What areas will be affected? • Prominent retailers and regionally focused distribution and logistic providers have been the target tenants for the majority of development both underway and planned in Lehigh Valley, Southern New Jersey and Bucks County. Would you like to make any additional observations about the industrial market in your area? • Another trend in the industrial markets discussed is an increase in the price of land. This is no real surprise, considering the common issue of a lack of land.

Philadelphia Multifamily McGowan Submitted by Lizann McGowan, first vice president with the Philadelphia office of CB Richard Ellis. Posted 5-1-06. What area is your expertise? • The Philadelphia metropolitan statistical area (MSA), which includes Center City and the surrounding suburbs of Pennsylvania, New Jersey and Delaware. What trends do you see presently in multifamily development in your area? • The Philadelphia MSA is widely known as a market with high barriers to entry. We typically see an average of 600 new units added to the inventory annually across a seven-county region. During the past 2+ years, however, we have seen six or more new communities come online. Many of these have been in process for several years. Who are the active multifamily developers in your area? • Some of the most active developers include O'Neill Properties, Dranoff Companies, Dewey Companies and Cornerstone Communities. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? • Station Square Apartments is a brand new multifamily community located in Lansdale, Pennsylvania. When completed, the community will consist of 345 units. The property occupies a strategic location adjacent to the Pennbrook Station of the R5 SEPTA Regional Rail line. As part of the overall project, developer Dewey Communities built additional parking for the train station and has dedicated it back to the township. The project is also significant because it represents the first new apartment community in Upper Gwynedd Township in more than 30 years. • Jefferson Woods in Langhorne, Pennsylvania, was developed by JPI. At 377 units, Jefferson Woods is one of the largest new developments in the Philadelphia region. Completed in late 2005, it is also the newest community in its submarket since 1997, which underscores the high barriers to entry in the market. The property occupies a highly visible and accessible location at the intersection of Interstate 95 and Route 1 and provides excellent access to Philadelphia and the northern suburbs as well as Northern New Jersey and New York. Where is the majority of development taking place? Why is this area doing well? • The majority of new development is in the suburbs, which is where it has been historically due to availability of land. The central business district has witnessed numerous conversions of Class B and Class C office buildings into apartments and more recently, condominiums. What area do you expect to be the next big development market? Why? • This is tough to qualify. In the suburbs, the majority of available land is in the western suburbs (i.e., Chester County) and northern suburbs (i.e., northern Montgomery and Bucks counties). Meanwhile, Center City is expected to see numerous projects slated for condominium development, both ground-up and conversions of apartment buildings or former office buildings. What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing? • As the warmer weather has begun, leasing activity has picked up across the entire market. However, year-to-date, the Class B sector of the market has probably seen the most significant increase in leasing activity as compared to 2005. Please give a measure of apartment vacancy rates. • According to Reis, the region reported a vacancy rate of 4.2 percent at year-end 2005. 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? • As with many markets, historically low interest rates during the past 3 years have had an impact on the Class A rental market, as residents have opted to purchase homes instead of renting. As interest rates rise, owners expect this trend to reverse. Conversely, the same low interest rates have enabled some previous renters to purchase condominiums, particularly in Center City. What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market? • The most significant employment growth in the region is occurring in the suburbs, which bodes very well for the multifamily market in the suburbs, particularly the new development that came online in 2005. Employment growth is also occurring in Center City, which is a positive trend for rental communities in the city. Would you like to make any additional observations about the multifamily market in your area? • Given the high barriers to entry, demand will remain high for newer Class A apartments in the suburbs. In Center City, there are two distinct demographic groups moving into rental apartments and condominiums in the city: young professionals and empty nesters. According to the Center City district, "the proportion of downtown residents between the ages of 25-34 doubled to 30 percent since 1970." (Source: CCD/CPDC report: Residential Development: 1997-2005, Nov. 2005). This trend is expected to continue, as the amenity base in the city continues to increase.

Pittsburgh Multifamily Kamin Submitted by Cynthia Kamin, senior vice president of CB Richard Ellis in Pittsburgh. Posted 02/07/08. What area is your expertise? • The Greater Pittsburgh Metropolitan Area and Western Pennsylvania. What trends do you see presently in multifamily development in your area? • The Greater Pittsburgh MSA is a very stabilized and historically steady market. There are high barriers to entry, modest but steady rent increases, strong occupancy and limited concessions are offered to tenants. Who are the active multifamily developers in your area? • The recent active developers in the Greater Pittsburgh MSA include Lincoln Properties and Continental. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? • The Cork Factory located in the “Strip District” on the river front in Pittsburgh. This project was recently developed into 297 luxury apartments from a vacant warehouse. The Cork Factory is a tremendous success in terms of lease-up time and achieving record high rents. This project, along with The Encore on 7th, represent the two newest apartment communities built in the City of Pittsburgh in more than 30 years. The Encore on 7th was built from the ground up by Lincoln Properties. The community contains 151 luxury rental units and was completed in 2006. Where is the majority of development taking place? Why is this area doing well? • The majority of development has historically been in the suburbs where the availability of land exists. There has been a recent surge of condo and multifamily development in the Central Business District (CBD). Within the past 2 years Downtown Pittsburgh has increased its number of residential units by approximately 50 percent. What area do you expect to be the next big development market? Why? • We would expect that development will continue in the Northern suburbs due to the new Westinghouse Facility being built in Cranberry. What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing? • In Moody’s third quarter report they rated Pittsburgh 100 points out of a possible 100 points for the multi-housing market. Currently all submarkets are doing relatively well as far as leasing activity. Please give a measure of apartment vacancy rates. • The overall apartment vacancy for the Greater Pittsburgh MSA for third quarter 2007 was 6.1 percent. The strongest submarkets as far as occupancy were in the East and in the City. Please give a measure of condo sales activity in the area. • Pittsburgh has not been a big condo conversion town. Most of the condo activity is in new construction and is occurring Downtown, Shadyside and Squirrel Hill markets. The activity is strong. 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 the next year? • Low interest rates create an environment for individuals to qualify for loans and purchase homes, which has a negative effect on the occupancy of apartment buildings. As interest rates rise, we would expect to see occupancy in apartment buildings to continue to increase. What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market? • Historically job growth has been flat, but we have seen a recent increase in jobs and expect that trend to continue. Unemployment rates in Pittsburgh are doing better than the national average.

Philadelphia Office Seligsohn Submitted by Jeffrey R. Seligsohn, principal with the Philadelphia office of Seligsohn Soens Hess. Posted 09/25/07. What area is your expertise? • I will be discussing the Philadelphia Central Business District (CBD). What trends do you see presently in office development in your area? • Continued conversion of Class B office buildings to hotel, condo and/or apartments. Who are the active office developers in your area? • Liberty Property Trust and Brandywine Realty Trust are active in our area. Please name one or two significant office developments in your area. What impact will these projects have on the market? Comcast Center — This will add another trophy class building to a Philadelphia CBD that lacks a significant trophy presence. Owners are: Immobillen AG and Commerzbank AG (80 percent) and Liberty Property Trust (20 percent). A second is Science Center at 3711 Market Street. Where is the majority of development taking place? Why is this area doing well? • Market Street West and University City continues to see growth thanks to the University of Pennsylvania / CHOP / Drexel University. What area do you expect to be the next big development market? Why? Market Street East — The Girard Estate block, which borders Market Street North, 12th to 11th streets, and Chestnut to South streets. There is no real Class A market besides Aramark Tower at the moment. What areas are doing well in terms of office leasing?Which areas are struggling with office leasing? • Doing well: Market Street West and University City. Doing poorly: none. Please give a measure of office vacancy rates. • The current rates are 11 percent to 13 percent in the Philadelphia CBD. 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? • Type: government. Specific tenant: Comcast Corp.

Pittsburgh Office Submitted by Matt Virgin, office specialist with the Pittsburgh office of Langholz Wilson Ellis, Inc./CORFAC International. Posted 09/13/07. What area is your expertise? • My concentration is in office tenant representation throughout the Greater Pittsburgh metropolitan area. What trends do you see presently in office development in your area? • Several new build-to-suit projects are under way and the market continues to gain traction. Rates continue to rise and incentives have diminished. Who are the active office developers in your area? • The Elmhurst Group, DiCicco Development, The Soffer Organization and Horizon Properties. Please name one or two significant office developments in your area. What impact will these projects have on the market? • Washington Electric Company plans to build a 775,000-square-foot campus in Cranberry Township and Consol Energy is constructing a 225,000-square-foot headquarters facility near Canonsburg, Pa. Where is the majority of development taking place? Why is this area doing well? • The majority of the “new” development is taking place in our northern and southern suburbs along the Interstate 79 corridor. These areas have been the primary residential growth areas in the region. Superior highway infrastructure and tax incentives have driven development. What area do you expect to be the next big development market? Why? • Cranberry and other northern markets will continue to develop because of the availability of property and increasing demand. The relocation of Westinghouse Electric Company to this market will also continue to drive development. What areas are doing well in terms of office leasing? Which areas are struggling with office leasing? • The Oakland section of the City of Pittsburgh continues to have very low vacancy rates and the Central Business District continues to be one of the softer submarkets, although it has improved. The Parkway East/Monroeville submarket is seeing significant change at this time and may struggle to fill the void left by Westinghouse. Please give a measure of office vacancy rates and a measure of available sublease space. • Across the market office vacancy rates are 14.8 percent and there is approximately 400,000 square feet of sublease space available (CoStar first quarter 2007 report). 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? • Higher interest rates on construction loans have driven tenant improvement costs higher than we have seen in the past. I expect this trend to continue in the near term. What is the status of job growth/(un)employment rates and what bearing will it have on the office market? • The unemployment rate for the Pittsburgh region is 4.2 percent, which is lower than the national average. The office market has been positively affected with jobs being added in many sectors. 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? • Energy, mining and oil and gas exploration tenants have been absorbing large blocks of space as well as medical administration and related use. I expect larger blocks of space to continue to be absorbed by those segments. Uses related to the University of Pittsburgh and Carnegie Mellon University will also absorb significant space over the next 24 months.