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2009 Office Market Overview

2009 Office Market Overview. Presented by Spencer Stouffer Managing Director 703.770.3462 spencer.stouffer@cassidypinkard.com January 27, 2009. Cassidy & Pinkard Colliers Capital Markets Overview Office Statistics for DC area & Predictions DC Northern Va. Maryland GSA

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2009 Office Market Overview

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  1. 2009 Office Market Overview Presented by Spencer Stouffer Managing Director 703.770.3462 spencer.stouffer@cassidypinkard.com January 27, 2009

  2. Cassidy & Pinkard Colliers Capital Markets Overview Office Statistics for DC area & Predictions DC Northern Va. Maryland GSA Construction Pricing Agenda

  3. Leasing Portfolio of 53M square feet Management Portfolio of 21M square feet Largest Lease Deals in the Region Largest Finance Deals Sales – Transacted $1B of the $3.4B Cassidy & Pinkard Colliers

  4. Cassidy & Pinkard – Consolidation New Company Overview 320 million sf properties under management 210 million sf of space for lease $5 billion in annual capital market transactions $13 billion in transactions $800 million in construction projects 22,000 managed corporate facilities 2,000 employees 210 owners

  5. Investment Sales Market

  6. Office Sales Lowest Since 1999 Washington Metro Area, $Volume Billions Source: Cassidy & Pinkard Colliers

  7. CMBS Office Loans Maturing in DC Region Dollar Volume ($Billions) Loan Volume Dollar Volume Loan Volume

  8. Sales Volume Forecasted below $2B in 2009 Being in DC is good Back to Basics – Equity Contribution 2-3x 2007 levels You don’t want to be a Seller Pricing has changed (Cap rates up 200 bps) Recovery???? Relationships Matter Conclusions

  9. Office Leasing Market

  10. 80-90% renewals Tenants & Tenant brokers skeptical regarding Landlord’s ability to perform (self-help, escrow) Moved from a “Negotiation” market to a “Competition” market Many deals being retraded at the last minute Sublease space inventory increasing Leasing – What is happening out there?

  11. District of Columbia: New Supply Mostly in Non-Core Markets Square Feet (Millions) Source: Cassidy & Pinkard Colliers

  12. Prediction “The District will be the only office market in the country to record positive absorption in 2009.”

  13. Northern Virginia Office Market

  14. Tenant Activity • 8,000,000 sf of “Tenants in the Northern Va. Market” • 20+ deals “in the market” over 75,000 sf

  15. Continued consolidation among large contractors – many "one off" offices will be closed at lease expiration Two or Three Gov. Contractors sign leases in excess of 400,000 sf in 2009 Predictions

  16. Construction Costs

  17. Metro Washington, DC Construction Market 2009 Trends • Approximately 20% Reduction in Cost

  18. GSA & Federal Leasing

  19. TRENDS: What’s on the Federal Horizon Big Deals: The Consolidation will Continue 2003 - 2008: Over 5.2 Million Square Feet of Consolidation Leases Median Size: 575,000 Square Feet 2009 – 2013: Well Over 4 Million Square Feet of Consolidation Demand Winners: NOMA, Southwest, Prince George’s Renewals will Continue for Sub-prospectus Leases 2005 – 2008: Renewals Exceeded 91% of Expiring Leases Poor GSA Planning will Continue to Result in Lease Holdovers Winners: CBD and Crystal City GSA Leasing Methodology Protests are Killing Source Selection Criteria Price Only Competition will Reemerge as the Standard Winners: No One! (maybe the taxpayers)

  20. TRENDS: Sectors for Federal Growth “Which agencies will grow under Obama?” Department of Transportation (DOT) Why?: $53.1 Billion of Emergency StimulusFunding Submarkets of Influence: Southeast/Ballpark Area Likely Suspects: Contractors State Department (State) Why?: Diplomatic and Consular Affairs Expansion / Hillary Clinton Submarkets of Influence: CBD, West End, Rosslyn Likely Suspects: Federal Employees Department of Energy (DOE) Why?: Alternative Energy Strategy Submarkets of Influence: Southwest, Suburban Maryland Likely Suspects: Federal Employees and Contractors

  21. TRENDS: Sectors for Federal Growth Health and Human Services (HHS) Why?: Health Care System Overhaul Submarkets of Influence: Suburban Maryland Likely Suspects: Federal Employees and Contractors National Institutes of Health (NIH) Why?: Medical Research / Health Care System Overhaul Submarkets of Influence: Suburban Maryland Likely Suspects: Federal Employees and Contractors Department of Education (EDU) Why?: $66 Billion of Emergency Stimulus Funding Submarkets of Influence: Southwest, CBD Likely Suspects: Federal Employees

  22. Summary

  23. We are fortunate to be in DC Area “Back to Basics” Service and Relationships Guiding Strategy – Bridge to the better market Summary

  24. 2009 Office Market Overview Presented by Spencer Stouffer Managing Director 703.770.3462 spencer.stouffer@cassidypinkard.com January 27, 2009

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