1. Society of Industrial and Office REALTORS® 1 Industrial & Update SIOR New Mexico Chapter Office Market

2. Society of Industrial and Office REALTORS® SIOR Market Update  SIOR is the leading industrial and office real estate brokerage association.  SIOR confers the SIOR designation to only the most knowledgeable, experienced, ethical, and successful commercial real estate brokerage specialists. What is SIOR?

3. Society of Industrial and Office REALTORS® SIOR NM Chapter Members

4. Society of Industrial and Office REALTORS® THANK YOU SPONSORS

5. Society of Industrial and Office REALTORS® AGENDA Overall local Industrial and Office Statistics Comparison to Regional Markets Industrial Market Overview - Erick Johnson Office Market Overview - Debbie Harms Questions ?

6. Society of Industrial and Office REALTORS® INDUSTRIAL VACANCY, NET ABSORPTION & COMPLETIONS ABQ Industrial market has had positive net absorption over the last 3 quarters.

7. Society of Industrial and Office REALTORS® INDUSTRIAL GROSS ACTIVITY VS. VACANCY

8. Society of Industrial and Office REALTORS® INDUSTRIAL COMPLETIONS Over 100,000 SF of new industrial buildings completed in 2014

9. Society of Industrial and Office REALTORS® INDUSTRIAL MEDIAN ASKING RENTAL RATES Manuf $6.49/SF Office Whse $5.94/SF R&D/Flex $8.32/SF Whse Distribution $5.88/SF

10. Society of Industrial and Office REALTORS® INDUSTRIAL MEDIAN ASKING RENTAL RATES vs. VACANCY Overall Median Asking Lease Rate - $6.50/SF

11. Society of Industrial and Office REALTORS® OFFICE VACANCY, NET ABSORPTION & COMPLETIONS

12. Society of Industrial and Office REALTORS® OFFICE VACANCY, SIGNIFICANT MOVEMENTS Molina & BCBS

13. Society of Industrial and Office REALTORS® OFFICE GROSS LEASING VS. VACANCY RATE Office Vacancy Rate is just below 22%

14. Society of Industrial and Office REALTORS® Trendline (Overall) OFFICE MEDIAN ASKING LEASE RATE Class A $22.50/SF Class B $17.98/SF Class C $13.55/SF

15. Society of Industrial and Office REALTORS® OFFICE MEDIAN ASKING LEASE RATE VS. VACANCY RATE Median Asking Lease Rate Vacancy Rate Overall Median Asking Lease Rate - $15.50/SF

16. Society of Industrial and Office REALTORS® 16 Industrial Overview Erick Johnson, SIOR Johnson Commercial Real Estate

17. Society of Industrial and Office REALTORS® Albuquerque Industrial Market  Status of the market  User Requirements  Top Transactions  Why these transactions occurred  What can be done to meet user’s requirements?  Where is the market headed? Agenda Industrial Overview

18. Society of Industrial and Office REALTORS® Status of the Albuquerque Industrial Market  Lack of functional inventory for spaces 10,000 SF & above  Sporadic demand  Improvement costs often unfeasible  New construction is not feasible until lease rates increase  Is it a Landlord or a Tenant market? ( Perception vs. Reality) & (Class A vs. Classes B-C) Status of the Market Industrial Overview

19. Society of Industrial and Office REALTORS® User Requirements  Turn-Key Improvements  Short Delivery Time Frame  Size Flexibility – Tenants want the potential to expand  Fire Suppression Systems  Less office build-out  Trailer Parking  Higher clear heights/ceiling clearances User Requirements Industrial Overview

20. Society of Industrial and Office REALTORS® Why Higher Ceiling Heights Industrial Overview

21. Society of Industrial and Office REALTORS® Largest Industrial Transactions Q4 2013 – Q3 2014 Top Transactions For 2014 Industrial Overview

22. Society of Industrial and Office REALTORS® SOUTH I-25 2 NORTH I-25 1 NORTH VALLEY 2 WEST MESA 2 MESA DEL SOL 1 RIO RANCHO 1 Top Transaction For 2014 Industrial Overview

23. Society of Industrial and Office REALTORS® 123 Montaño Rd NW Industrial Overview

24. Society of Industrial and Office REALTORS® PURPOSE: Consolidate two facilities into one BENEFITS TO SOUTHERN WINE & SPIRITS:  Adequate ceiling clearance (25’)  Abundant Trailer parking (3.8 per dock door)  Landlord’s willingness to make improvements  Limited existing alternatives while build-to-suit options were much more expensive Relocation from 140,000± SF to 163,475± SF Southern Wine and Spirits Transaction Industrial Overview

25. Society of Industrial and Office REALTORS® 3980 Prince St. SE Industrial Overview

26. Society of Industrial and Office REALTORS® PURPOSE: Consolidated two facilities into one BENEFITS TO ADMIRAL BEVERAGE:  Preferred to own  No existing space of adequate size available for sale  Initially considered rail service as a requirement, but found it was not essential Relocation from 115,000± SF to 219,000 SF Admiral Beverage Transaction Industrial Overview

27. Society of Industrial and Office REALTORS® 540 Gallatin Pl NW Industrial Overview

28. Society of Industrial and Office REALTORS® PURPOSE: Relocated from 50 year old facility to 10 year old facility BENEFITS TO PEPSI:  Increase ceiling clearance from 18’ to 28’  Landlord’s willingness to provide turn-key improvements  Landlord’s ability & willingness to provide trailer parking (1.3 per dock door) Relocation from 37,500± SF to 56,893± SF Pepsi Transaction Industrial Overview

29. Society of Industrial and Office REALTORS® Reduction in building area resulted in a reduction of the floor to land area ratio (FAR) from 36% to 27%.

30. Society of Industrial and Office REALTORS®  Willingness to remove functional obsolescence  Remove building additions, out buildings, etc. that are no longer functional  Remove excess office area and sensibly configure remaining space or leave as open office  Adapt dock areas to better accommodate full size tractor-trailers (saw toothed or angled docks, recessed docks, etc.) How Do We Meet Demand? Industrial Overview

31. Society of Industrial and Office REALTORS® Angled Docks Recessed Docks How do we meet Demand? Industrial Overview

32. Society of Industrial and Office REALTORS®  Flexibility in suite sizes  Provide turn-key improvements  Separating the functionality of different building areas and relate applicable lease rates to each area  Don’t just hope the ideal user shows up at your door; do what’s possible to meet demand.  Hire an SIOR that knows the market and the competing properties Industrial Overview How Do We Meet Demand?

33. Society of Industrial and Office REALTORS® Functional supply will continue to dwindle as there will be minimal new construction Lease rates have stabilized but need to increase 25 - 30% before we see new construction Building owners can better compete by removing functional obsolescence National tenants may drop priority level of ABQ requirement due to lack of inventory What’s in store for the industrial market? 2015 Forecast Industrial Overview

34. Society of Industrial and Office REALTORS® 34 Office Market Overview Debbie Harms, SIOR NAI/Maestas & Ward Commercial Real Estate

35. Society of Industrial and Office REALTORS® Net Absorption, Vacancy & Completions Office Overview

36. Society of Industrial and Office REALTORS® Gross Leasing vs. Vacancy Office Overview

37. Society of Industrial and Office REALTORS® Trendline (Overall) Median Asking Lease Rate Office Overview

38. Society of Industrial and Office REALTORS® Class A – Lease vs. Vacancy Rate Office Overview

39. Society of Industrial and Office REALTORS® Class A – Lease vs. Vacancy Rate Office Overview Asking Lease Rate stabilized at $22.50/SF Vacancy Rate drops from 22% - 13% when Downtown omitted

40. Society of Industrial and Office REALTORS® Class B – Lease vs. Vacancy Rate Office Overview

41. Society of Industrial and Office REALTORS® Class C – Lease vs. Vacancy Rate Office Overview

42. Society of Industrial and Office REALTORS® 4400 Masthead NE  Total building SF: 164,545± SF  Transaction: 68,000± SF  Tenant: GAP, Inc.  This building was formerly occupied by the Department of the Interior.  Added to the Class A Office inventory in 2014. Class A Top Transactions Office Overview

43. Society of Industrial and Office REALTORS® 4411 The 25 Way NE  Total building SF: 220,000± SF  Transaction: 84,724± SF  Tenant: Blue Cross, Blue Shield  After having this space vacant for more than a year, this transaction brought the occupancy at this project to 100%. Class B Top Transactions Office Overview

44. Society of Industrial and Office REALTORS® 4041 Jefferson Plaza NE  Total building SF: 72,000± SF  Transaction: 33,682± SF  Tenant: Canon Information Technology Services  The former occupant, an engineering firm downsized to 8,000 SF in a different building, without reducing employee count. Class B Top Transactions Office Overview

45. Society of Industrial and Office REALTORS® 2130 Eubank NE  23,243± SF  Buyer: University of New Mexico  This former bank building will now be utilized as a UNMH family practice clinic. Class B Top Transactions Office Overview

46. Society of Industrial and Office REALTORS® 8650 Alameda NE  21,177± SF  Tenant: New Mexico International Charter School  Newly constructed in 2009, this building was completed and occupied in 2014. Class B Top Transactions Office Overview

47. Society of Industrial and Office REALTORS® 2000 Randolph Road SE  27,598± SF  Tenant: Cien Aguas Charter School  This property has been repurposed from office to educational. Class C Top Transactions Office Overview

48. Society of Industrial and Office REALTORS® 707 Broadway Blvd NE  20,320± SF  Tenant: Open Skies Behavioral Health  This 71,562 SF building has seen a change in ownership and extensive improvements. Class C Top Transactions Office Overview

49. Society of Industrial and Office REALTORS® Class A Office Space Existing Class A Office space is mostly occupied, at a good rate If not occupied, it is a location problem Construction of new Class A office space continues to be hindered by cost perceptions. What does it all mean? Office Overview LOCATION

50. Society of Industrial and Office REALTORS® Class B Office Space Existing Class B office space is mostly occupied, at a good rate, with stable tenants If not occupied, it is a location problem, a quality problem, an improvement cost problem or a financing problem. Asking Rates will not justify the construction of any new Class B office space What does it all mean? Office Overview

51. Society of Industrial and Office REALTORS® Class C Office Space Existing Class C Office space has the highest vacancy rate. A large portion of vacant Class C Office Space is functionally obsolete or locationally challenged Innovative change in the use of existing Class C space is the most likely way to lease the space What does it all mean? Office Overview

52. Society of Industrial and Office REALTORS®  Office users will continue to migrate to quality office buildings.  Vacancy in unkempt, unclean property will continue to rise.  Our market will remain a “Tenant’s Market”  There may be justification for new construction. This justification will come in the form of tenant acceptance of the substantially increased rates. 2015 Forecast Office Overview Office users will continue to migrate to quality office buildings. Vacancy in unkempt, unclean property will continue to rise. Our market will remain a “Tenant’s Market” There may be justification for new construction due to tenant acceptance of increased rates.

53. Society of Industrial and Office REALTORS®

54. 54 Industrial & Update SIOR New Mexico Chapter Office Market