The Great Recession was about as bad as anyone who is currently in business can remember. Because of that, even when we have been in full recovery for a couple of years, it hasn’t felt that way for many people.   We may go back into another recession before the investor community has bought into the fact the Great Recession is over. *Important* To add sub-bullets, use the Increase/Decrease List Level buttons to increase the indent and add the correct bullet graphic. Slide numbers can be manually deleted. Select the slide number box and click delete. But… Best practice for removing the slide number at lower right is: Go to the Insert tab In the Text section, click the Slide Number button. The Header/Footer dialog will open. In the Slide tab, uncheck the Slide Number box and click Apply. To turn the slide number back on, follow the steps above, and at Step 3 make sure there is a check mark in the Slide Number box and click Apply. This works even if you have manually deleted the slide number box.

On the Bright Side Home Values are up – inventory is at normal levels Job Numbers in Arizona are fully recovered Companies are moving into and expanding in Arizona Population in Arizona is growing Construction is active in all commercial property types Rental rates are growing and absorption is good Land prices are back up to previous levels

Reality Is Always Lurking Buyers are still looking for “deals” most of the time Look behind many of the “trophy” sales – were they trophy or value-add? Cap rates have remained constant for 18 months Retailers are filing for bankruptcy – Amazon is delivering using driverless cars Offices are requiring an increasing number of parking spaces New construction costs keep going up ISIS, Presidential debates, Fires in Canada, El Nino – there is plenty of uncertainty

2013 - 2015 Sales Recap

Top Two Sales – Highest Price and $PSF OFFICE Top Two Sales – Highest Price and $PSF December 22, 2015 March 11, 2015 2525-2575 E Camelback Rd Phoenix, AZ Size/Occ.: 978,495 SF / 60% CAP Rate: 3.80% Sales Price: $279M; $285 PSF 2415 E Camelback Rd Phoenix, AZ Size/Occ.: 218,266 SF / 92% CAP Rate: 7.10% Sales Price: $74.3M; $340 PSF

OFFICE All of the Year’s Market Makers

OFFICE Other Key Trends Sales increased by 75% – ending the year at $3B, the second highest year, after the $3.2B posted in 2007 Prices PSF ended the year at $173, a 25% jump over 2014 levels, but still 12% below 2007 15 sales exceeded $50M, representing one-half of the total sales volume at an average of $225 PSF The Camelback Corridor posted the largest volume of sales, with $622M invested averaging $260 PSF in nine transactions

OFFICE

Top Two Sales – Highest Price and $PSF RETAIL Top Two Sales – Highest Price and $PSF June 30, 2015 March 31, 2015 32331-32687 N Scottsdale Rd Scottsdale, AZ Size/Occ.: 185,065 SF / 97% CAP Rate: 5.50% Sales Price: $54.1M; $292 PSF 6560 N Scottsdale Rd Scottsdale, AZ Size/Occ.: 22,081 SF / 100% CAP Rate: 5.50% Sales Price: $14.0M; $634 PSF

RETAIL All of the Year’s Market Makers

RETAIL Other Key Trends Two private capital investors each purchased three properties for a combined total of $123M Institutional buyers secured 10 grocery-anchored and large single-tenant deals totaling 22% of all sales volume, averaging $178 PSF Institutional sellers selectively groomed their portfolio, recycling $144 M from nine properties Scottsdale was the most active submarket accounting for 29% of total sales volume in 16 deals averaging $212 PSF  

RETAIL

Top Two Sales – Highest Price and $PSF INDUSTRIAL Top Two Sales – Highest Price and $PSF February 27, 2015 December 30, 2015 Metro Phoenix, AZ Size/Occ.: 2,609,671 SF / 91% (portfolio) CAP Rate: 6.00% (portfolio) Sales Price: $229.67M; $88 PSF 7195 S Shutterfly Dr Tempe, AZ Size/Occ.: 237,000 SF / 100% CAP Rate: 6.60% Sales Price: $43.1M; $182 PSF

INDUSTRIAL All of the Year’s Market Makers

INDUSTRIAL Other Key Trends Sales increased 12% above prior year sales and were more than double the volume of 2011 Institutional buyers continued to dominate acquisitions of the highest quality properties, capturing 43% of the sales in 2015 Portfolio sales represented 37% of 2015 sales, totaling $468M Average user/buyer PSF prices have grown by 48% since 2011 After posting 27 in 2011, 26 in 2012, 11 in 2013 and 7 in 2014, there were only four industrial sales from REO Sellers in 2015 averaging only $53 PSF

INDUSTRIAL

Trends Across all Types of Real Estate Sustainability in Building Systems High speed internet, lower energy consumption, more parking, fewer walls more open space The Internet of Things (IoT) All equipment is being designed to connect to the internet - not just the computer

Trends Across all Types of Real Estate Space Utilization Different than 10 years ago, and it will be vastly different 10 years from now No exceptions Autonomous: Replacing Humans for Automation It is not just about driverless cars – jobs are shifting around Entrepreneurialism is growing, and looks different Rent your home; rent your car – with the help from a nerd-based company to provide the technology to connect to the customer

How is this Impacting Commercial Real Estate? Converting empty, obsolete buildings – 26 empty office and retail buildings sold in 2015 – 1.9 million SF – 150+ acres Datacenters Every 14 months the demand doubles Fastest growing sector of commercial real estate Phoenix is a Tier 1 market due to disaster-free, reliable power grid, reasonably inexpensive power, easy to get to

How is this Impacting Commercial Real Estate? New construction incorporates all of the newest, most current trends  Smart buildings, parking, energy efficient, floorplates Connectivity Village cores, CBD, convenience, freeways, bus lines, light rail, airport, ASU, live, work, play locations

Contact Information: Mindy Korth Colliers International Executive Vice President Investment Properties D: 602 222 5005 M: 602 531 5538 E: mindy.korth@colliers.com