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National Airport-Area Office-Warehouse Rental Rate Survey

National Airport-Area Office-Warehouse Rental Rate Survey. ACI-NA March 29, 2007. Ed Riggins, CCIM Executive Vice President. The 7-10-Year Real Estate Cycle. Low vacancies. Absorption of excess supply. Increasing prices and rents. Declining prices, rents, construction.

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National Airport-Area Office-Warehouse Rental Rate Survey

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  1. National Airport-Area Office-Warehouse Rental Rate Survey ACI-NA March 29, 2007 Ed Riggins, CCIM Executive Vice President

  2. The 7-10-Year Real Estate Cycle Low vacancies Absorption of excess supply Increasing prices and rents Declining prices, rents, construction Accelerated new construction High vacancies Oversupply

  3. City Inclusion Criteria • Heavy cargo traffic per ACI • Presence of airport related functions per D&B • forwarders • expedited truckers • airline parts suppliers

  4. Survey Property Criteria • 3 properties per city – average of net asking rates • 4th quarter data collection • Dock high truck doors • Off airport-owned property but, w/in 5 miles • Sized for hypothetical user • 20,000 sq. ft. • 20% office finish

  5. 2007 Rental Rate Survey Results

  6. 2007 Rental Rate Survey Results

  7. 2001 – 2007 National Average

  8. Lessons Learned • Subleases at 20-50% off in 2001-2002 for 18-24 months • Some new development by 2004-2005. • Expenses now 10-25% of rental costs • Leases “more net” – mgt. fees, roof/parking repair, etc. • Free rent still preferred to rate reduction • Cap rates down from 9-10% on 2000 to 5-6% now • For tenants - More time = more choices = more leverage

  9. How Properties Are Valued Net Income Sales Price Capitalization Rate =

  10. How Properties Are Valued $6.5 per sq. ft $100 per sq. ft = 6.5%

  11. How Properties Are Valued If this goes down… …this goes up $6.5 per sq. ft $108 per sq. ft = 6.0%

  12. The 7-10 Year Real Estate Cycle Low vacancies Absorption of excess supply Increasing prices and rents Didn’t happen Declining prices, rents, construction Accelerated new construction High vacancies Oversupply

  13. The 7-10 Year Real Estate Cycle Low vacancies Absorption of excess supply Increasing prices and rents Here Now? Declining prices, rents, construction Accelerated new construction High vacancies Oversupply

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