Preliminary Market Overview [ Robert Lunz – Nicollet Partners] 3M Community Advisory Committee

Retail 1.0 Wave of recent store closings (Circuit City, Linens n Things, Wilsons Leather, etc.) Poor retail sales forecasts Focus on necessity retail uses vs. discretionary Many retail chains have relatively convenient proximity Given current market, sizeable (>11 acres) retail development not likely feasible

Retail 1.1 Large-scale retail development is the most unlikely to be supported. Ability of additional retail uses to succeed is dubious given the large amount of existing storefront retail along major arterials in the area. Retail could be viable as a smaller ancillary addition to a mixed-use scenario.

Office 1.0 Major office development likely not supported. Site would be competing against existing Downtown Class B (30.6% vacancy, NAIOP Office Report Nov 2008). Adding the existing office SF, post renovation, to the Downtown Class B market would represent a +7.5% increase in the base amount of space in this class.

Office 1.1 No evidence of a market of the magnitude necessary to use all 350,000 SF of space available (or that one could be created). Multiple adaptations and cures would require large capital expenditures for properties still out of their element in attracting office space users. Large government office use one possibility to use existing space.

Residential 1.0 Oversupply in housing market means a three to five year period before any substantial resl project groundbreaking. Initial smaller residential project could break ground in a short time frame. Last 1½ years new residential development in core cities has halted, buyers have dried up. Risk of rising interest rates is significant given the size of the site and a total build out years into the future

Residential 1.1 If mortgage rates rise substantially, a market-rate rental apartment development may be feasible. Large-scale multi-family to be built all-at- once not financially feasible for at least five years. Any major urban village development would require 5-7 year holding period and associated costs.

Hospitality 1.0 Saint Paul lodging market already over built, no basis to expect any growth in room nights. Difficult to finance hotel deals due to special purpose design and business- operation critical nature (and the current financial crisis).

Industrial 1.0 Industrial properties to date have maintained the best market conditions of all real estate investment types. The three main industrial building types (bulk warehouse, office/warehouse, office/showroom) have had the least amount of occupancy/rental loss. NE Submarket absorbed a ten-year high of 1,327,000 SF in 1999, and ten-year low of 243,000 in Currently, no spec indl development and very little new indl development overall Opportunity exists for well-planned industrial park.

Prospective Market Value