Brokerage Outlook: Utah

• Salt Lake City Retail    New!

• Salt Lake City Industrial

• Salt Lake City Multifamily    New!

• Salt Lake City Office

Salt Lake City Retail Moore Submitted by Rob Moore, CCIM and vice president with the Salt Lake City office of CBC NRT Utah/ONCOR International. Posted 8-28-08. What area is your expertise? The greater Salt Lake City area and Utah. What trends do you see presently in retail development in your area? After a record year in 2007, with absorption of over 1.9 million square feet of retail space, this year is expected to slow down somewhat due to the pullback by many retailers nationwide and the tightening of the financial markets. Existing centers will remain strong and should not experience any significant increase in vacancy or decrease in lease rate. What type of retail product is doing well in your area? Grocery-anchored centers are still very strong mainly because the support types tenants are still expanding and our market remains one of the strongest in the country. What retailers are new to your area? The Cheesecake Factory, Whole Foods Market, Ulta, Sunflower Market, El Pollo Loco, Shari’s Restaurant, Corner Bakery, Red Mango, Stage Stores, Egg & I, and In & Out Burger. Who are the active retail developers in your area? The Boyer Company, The Woodbury Corporation, Amsource Development, Four Square Development and Taubman. Please name one or two significant retail developments in your area. What impact will these projects have on the market? The City Creek Development is a major mixed-use redevelopment in downtown Salt Lake City. It is a joint development between the Church of Jesus Christ of Latter-Day Saints and Taubman. The new retail project will encompass a three-block area that previously held two regional enclosed malls. Tenants announced are Nordstrom and Macy’s. This development will have a significant impact in redirecting retailing to the downtown area as opposed to the suburbs and will take advantage of the nearly 6 million visitors/tourists that visit the area every year. Where is the majority of development taking place? Why is this area doing well? Aside from the City Creek development above, the majority of new retail development has taken place in the high growth areas of the southwest quadrant of the Salt Lake Valley. Even with the residential downturn, this area continues to grow at a steady pace (supported by the highest birth rate and highest number of people per household in the country) and new service opportunities still exist. What area do you expect to be the next big retail development market? Why? The west side of Utah County, as well as Weber and Davis counties continue to grow, although at a slower pace, and new retail opportunities can still be found there. Please describe the retail leasing activity in your area. Existing quality projects will remain stable. Tenants are more cautious and are taking longer to make deals but are still attracted to our market as we continue to have some of the lowest unemployment rates in the country. What major leases have been closed recently? New Smiths Market place store (165,000 square feet) at SR 92 in Lehi, Utah. A new Super Wal-Mart in West Jordan Utah on Bangerter Highway. Please give a measure of retail vacancy rates and a measure of available sublease. The overall average vacancy rate for all markets and property type last year was 6.89 percent. This year, vacancy is expected to remain stable and close to the same vacancy.  What types of retailers should look into your market in the coming year? What type of retail is needed? Support retail for grocery-anchored centers.

Salt Lake City Industrial Heaton Submitted by Jeff Heaton, Industrial specialist with Salt Lake City-based NAI Utah Commercial Real Estate. Posted 03/03/08. What area is your expertise? • Industrial real estate in the greater Salt Lake area. A current, but growing base of 107 million square feet. What trends do you see presently in industrial development in your area? • Bigger does mean better. The Salt Lake industrial market is growing up.  Large, bulk distribution buildings (300,000 square feet+) are becoming common place as the consolidation of business has created a need for larger space and as Salt Lake becomes a preferred choice for distributors in the Western U.S. Prime industrial land is very hard to find. Values have doubled over the past 4 years. Increasing land values have also contributed to large lease rate increases across the board, from smaller incubator units to large bulk distribution facilities. What type of industrial product is doing well in your area? • All types, especially the 50,000-square-foot+ segment. Rates have risen, on average, by $.03 per square foot among all building types and square footages in the last 12-month period. The most significant rise in price per square foot has been in the 0-10,000 square foot spaces. Increases in values are attributed to the limited supply of buildings for sale, the relatively low cost of money and the rising price of land. Who are the active industrial developers in your area? • Freeport West, IDI, Buzz Oates, First Industrial. Bulk distribution space has been the primary driving factor in new construction. Only a select few developers have ventured to building with increments under 20,000 square feet. These developers are now gaining traction in the market. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? First Park Mountain View by First Industrial — Their 420,000-square-foot large land holdings and Class A industrial development are located in the heart of Salt Lake City’s transportation corridor. This will provide for many years of development close to the fully functioning intermodal hub facility. Freeport West — The California-based developer is a major player in the distribution market and has substantial land holdings. Freeport is under construction now on an approximate 600,000-square-foot building with divisible increments no smaller than 50,000 square feet. Both these projects will add much needed high cube distribution space to the market. Where is the majority of development taking place? Why is this area doing well? • The 5600 West corridor on the west end of the valley, due primarily to proximity to aforementioned intermodal hub as well as 5600 West’s location in path of development. What area do you expect to be the next big industrial development market? Why? • Land is extremely limited for future industrial developments. Outlying areas close to Salt Lake will be premier areas for future developments. Please describe the industrial leasing and sales activity in your area. • Leasing and sales activity are very strong. Current vacancy is 5.5 percent. Please give a measure of industrial vacancy rates. Please give a measure of available sublease space. • 5.5 percent vacancy with a very limited sublease basis. Demand remains high and supply low. 2007 saw 3.5 million square feet of positive absorption. 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? • The flux of capital markets in late 2007 has made borrowing a difficult process. Interest rates are likely to drop as the national economy struggles. Owner/user financing will still remain a great option. What industries do you expect to expand in 2008 to absorb a great deal of industrial space? What areas will be affected? • Two reports in 2008 have ranked Utah #1 for Economic Competitiveness. Companies in many sectors continue to look to Utah. Examples of new firm openings and major expansions of existing firms of 100 or more workers in 2007 included: Adam Aircraft Industries (business jet manufacturing) Affiliated Computer Services Inc. (call center) Amer Winter & Outdoor U.S. (ski equipment headquarters) Backcountry.com (outdoor retailer and distributor) Comcast (cable TV and Internet service) Dannon Co. (yogurt products) Fresenius Medical Care (dialysis products) Hunter Douglas (window coverings) IKEA (home furnisher) IM Flash Technologies (flash memory) KraftMaid Cabinetry (cabinets) MedQuist (medical transcription) MountainStar Healthcare (hospital) Orgill Inc. (home improvement products) Sorenson Communications (IP relays) Spring Canyon Energy (natural gas power plant) St. Regis (five-star hotel and condos) Viracon (glass products) West Liberty Foods LLC (meat processor) Utah will continue in 2008 to focus on recruiting industries to Utah such as Defense, Energy and Minerals, High Technology, Aerospace, Composite Industries, and Life Sciences. Would you like to make any additional observations about the industrial market in your area? • All in all, Salt Lake should remain a very strong market in 2008. Given historical demand, there is currently just over one year of remaining product. A strong local economy, consistent population growth and good basics should serve for another year of positive growth for industrial real estate.

Salt Lake City Multifamily Submitted by Patrick Bodnar, senior associate – Investment Properties, with CBC NRT Utah ONCOR International in Salt Lake City. Bodnar What area is your expertise? Utah Multifamily What trends do you see presently in multifamily development in your area?  Rental rates for apartments are on the rise. Utah realized the highest rent growth in all western states over last year.  9.9 percent increase.  The condo market has definitely slowed down considerably.  We are starting to see platted projects available for sale as developer confidence with current market conditions are low.  Rental rates will continue to climb over the next two years. Who are the active multifamily developers in your area?  Active multifamily developers in the Utah market are Cow-boy partners, The Church of Jesus Christ of Latter-Day Saints (LDS), and The Metro Condominiums. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? City Creek Center in downtown Salt Lake City is a sustainably designed, walkable urban community of residences, offices and retail stores that will rise over the next four years on approximately 20 acres across three blocks in the heart of downtown Salt Lake City being developed by LDS. Upon project completion in 2012, the city will be one of few in the nation with a vibrant, mixed-use development at its core.  In the initial phase of the project, approximately 750 residential units will be built. Most will be in condominium towers along South Temple Street and 100 South, but some rental properties will be available above the retail shops. Of the total residential units, Cowboy Partners, a Utah-based company, will be constructing approximately 100 condominiums and approximately 110 rental units on the south side of Social Hall Avenue, east of State Street. In determining current and future sites for residential construction at City Creek Center, planners are working to take full advantage of view-lines to downtown landmarks and the surrounding Wasatch Mountains. Where is the majority of development taking place? Why is this area doing well?  Most multifamily development is taking place around Transit Oriented Districts (TOD) and in downtown Salt Lake City.  The TOD locations are where the commuter rail and light rail stops are located all along the Wasatch Front.  These locations are desirable to developers as the zoning on these properties allow for much higher densities.  The slowing condo market will halt some development downtown and for other ‘for-sale’ product, however, the downtown City Creek project being developed by the LDS church, along with other projects already committed to going vertical will weather the storm of current market conditions.  What area do you expect to be the next big development market? Why?  New development will continue in areas in and around mass transit locations.  From the far south end of Utah county north to Ogden City in Weber county, these rail lines will move people to there places of business and entertainment providing a significant savings on the current high gas prices.  These locations have been mandated to have high-density allocations through the local municipalities due to federal funding regulations.  The high cost of fuel will make for a healthy absorption of these properties located near transit services. What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing?  All areas are doing extremely well in apartment leasing throughout the state of Utah as rents are rising across the board due to the barriers to purchasing a home in the current lending market.   Please give a measure of apartment vacancy rates. Overall vacancy in Salt Lake County, Utah currently rests at just less than 4 percent.  The surge in rental activity in the last six months has greatly decreased vacancy.  Owner’s across the board have had their pick of tenants all the while increasing rental rates. Please give a measure of condo sales activity in the area. Condo activity has slowed down completely in the Salt Lake City market.  Current projects already out of the ground are seeking to retain buyers who are under contract with deposits while other projects not yet out of the ground are returning deposits to perspective buyers until the market conditions change.  The City Creek Center project described herein is continuing to move ahead on its development plans for new condos and apartments in the CBD of Salt Lake City which will continue to enhance the downtown landscape, providing excellent housing options for residents. 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?  Current interest rates are slightly higher than in recent years, yet still very attractive for investors.  The slight raise in interest rates has put an upward pressure on cap rates.  Cap rates will only continue to rise if interest rates rise in the coming year.  The multifamily market will still outperform most other investment real estate given the strength in recent leasing activity.  What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market? Low unemployment in Utah  (3.0 percent at 2007 year end) combined with a 3.6 percent job growth rate continues to lead the nation.  Utah’s high internal growth rate keeps the labor market full of well-qualified candidates for employment.  This enhances the multifamily market as people will have a need for housing and apartments are currently providing a comfortable alternate to purchasing in a more challenging lending market. Would you like to make any additional observations about the multifamily market in your area? Utah continues to have a strong multifamily market.  Rental rates are climbing providing investor a good up-side on a purchase or an excellent price for a sale.  With all the continued growth across the state, the market continues to be extremely viable.

Salt Lake City Office Johnson Submitted by Barbara Johnson, Office specialist with Salt Lake City-based NAI Utah Commercial Real Estate. Posted 03/03/08. What area is your expertise? • Office leasing and sales in Salt Lake County What trends do you see presently in office development in your area? • The office market continues to show positive net absorption and a sustained demand for office product. Developers and the capital markets have not been over-zealous by creating a large supply of speculative office product. Most of the new office construction has had substantial pre-leasing activity.There is also a greater interest in creating a more green and sustainable office buildings. Who are the active office developers in your area? • DDRS, Boyer Company, Woodbury Corporation and Hamilton Partners Please name one or two significant office developments in your area. What impact will these projects have on the market? • The Gateway in the downtown area of Salt Lake City continues to have an impact on the office market. Large and notable companies such as Fidelity and Ernst and Young continue to locate in this mixed-use project. Tenants seek to have amenities such as restaurants, shopping, entertainment, condos, and light-rail transportation at their doorstep. This project will continue to be the “pace-setter” in office development and will be the development that will have little, if any, vacancy. Where is the majority of development taking place? Why is this area doing well? • The South end of the Salt Lake Valley along the Interstate 15 corridor is experiencing continuing increases in office demand. This area experiences growth due to new residential development. With a tight labor market of below 4 percent unemployment, Tenants want to retain their employees so their commutes lessen. What area do you expect to be the next growth area? • Northern Utah County will continue to grow due to land availability and the continued residential growth in Southern Salt Lake County. What areas are doing well in terms of office leasing? Which areas are struggling with office leasing? • Central Business District is very tight especially in Class “A” office space. Class “C” properties tend to have the largest vacancy in all regions. The northwest region by Salt Lake International Airport tends to lag behind the other regions. Please give a measure of office vacancy rates. Please give a measure of available sublease space. • Overall vacancy in Salt Lake County is about 11 percent and about 1 percent in sublease vacancy. 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? • Few speculative office buildings will be built due to current interest rates and the underwriting of loans. With fewer new speculative office buildings, office space will continue to be absorbed. Salt Lake County Market should absorb around 800,000 to one million square feet by end of year. What is the status of job growth/(un)employment rates and what bearing will it have on the office market? •Job growth continues with new companies coming to the market and local companies expanding. The Utah jobless rate averaged 2.6 percent during 2007’s first 10 months after averaging 2.9 percent in 2006, among the lowest rates in the nation. One critical factor helping labor availability has been a high level of net immigration. A record 44,250 more people moved into Utah than out during the 12-month period ending in July 2007. This surge of new residents has been at high levels since 2005, providing needed workers. Is there any type of office tenant absorbing a majority of space? What industries do you expect to expand to absorb a great deal of office space? What areas will be affected? • The financial sector continues to be strong. For example, Fidelity Investments continues to expand in Utah with another service center of approximately 50,000 square feet in Northern Utah County and their new occupancy of 230,000 square feet in Salt Lake City. The multi-level marketing companies with Utah’s entrepreneurial spirit continue to absorb large blocks of space. Back office requirements will remain strong due to lower costs in Utah. Would you like to make any additional observations about the office market in your area? • With a pro-business governor, Utah has been making great strides in recruiting new companies to come to Utah. The beauty and recreational aspects of Utah continue to attract both companies and employees to locate in Utah. The well-educated work force with strong research universities in the Greater Wasatch Front allows companies to remain on the cutting edge. Transportation is king. With more funding of public transportation to connect the four major counties in the Wasatch Front, employees will be able to commute easily to their jobs. The added bonus of funding for major expressways will only increase business and keep the local economy very healthy.