1. U.S. Property Market Update Mary Ludgin, PhD, Heitman Research September, 2007 There is a difference.

2. 2 GDP Has Peaked

3. 3 Job Numbers are Weak

4. 4 Recession Risk Up – Rate Cut Enough?

5. 5 Corporations Remain Profitable But…

6. 6 Cap Rates Poised to Move Up a Little

7. 7 With Repricing Mitigated by Staunch Investors U.S. Stocks Bonds Non- U.S. Stocks Real Estate

8. 8 And Increasing Capital Flows

9. 9 Most Western Metros Growing Faster than U.S. But Growth Will Slow

10. 10 L.A. and San Diego Lagging U.S. in Job Gains

11. 11 Apartments Feeling Brunt of Housing Market Correction

12. 12 Apartment Vacancies on the Rise

13. 13 But Apt. Rents Generally Still Growing Faster Than U.S. Average

14. 14 With a Few Exceptions

15. 15 Industrial Recovery Continues But Slowing

16. 16 Western Metros Beating U.S. Average

17. 17 This Carries Through to Rent Growth

18. 18 Mixed Picture on Industrial Construction

19. 19 Office Market Well Positioned for Slow Down

20. 20 Western Office Markets Mostly Healthy

21. 21 Office Rent Growth Varies

22. 22 As Does Construction Volume

23. 23 Sales Declining as Economy Slows

24. 24 Income Growth Will Drive Sales

25. 25 Retail Markets Starting From Good Position

26. 26 Construction Quite Modest in Some Markets

27. 27 Though Not Modest Everywhere