West Region Denver • Honolulu • Las Vegas • Los Angeles • Phoenix • Portland • Sacramento Salt Lake City • San Diego • San Francisco • Seattle • Tucson WestRegionTransactionBreakdown n CCIM Institute designees and candidates gave the West like national trends, with the office sector posting the great- regional economy a rating of 4.4 on a scale of 1 to 10, est decline since year-ago levels. with 10 being high, which was the lowest rating of all of the regions during second quarter 2008. Nearly half of the n Weighted-average capitalization rates for the West re- survey respondents expect the West regional economy to gion posted mixed results during second quarter 2008. worsen over the coming 4 quarters. Capitalization rates in the office, retail, and hotel sectors increased, while rates remained stable in the apartment n The volume of property transactions in the West region sector and declined in the industrial sector. decreased significantly during second quarter 2008, much Regional Transaction Price Breakdown/Tiers West Transaction Breakdown (7/1/07 - 6/30/08) Office Industrial Retail Apartment Hotel < $2 Million “Stick to investing in fully-leased Volume (Mil) $789 $1,359 $1,077 $1,050 $30 buildings and Size Weighted Avg. ($ per sf/unit) $125 $94 $124 $78,898 $35,097 strip centers.” Price Weighted Avg. ($ per sf/unit) $165 $122 $161 $94,778 $40,771 – Phoenix Median ($ per sf/unit) $135 $105 $125 $83,333 $36,136 $2 - $5 Million Volume (Mil) $1,855 $2,511 $2,183 $2,258 $325 Size Weighted Avg. ($ per sf/unit) $182 $103 $195 $98,228 $51,037 Price Weighted Avg. ($ per sf/unit) $241 $139 $286 $129,435 $66,574 “Apartments and Median ($ per sf/unit) $217 $128 $251 $118,740 $59,733 neighborhood > $5 Million shopping centers offer Volume (Mil) $30,892 $10,659 $9,002 $19,013 $17,342 the best potential.” Size Weighted Avg. ($ per sf/unit) $278 $113 $206 $144,331 $325,928 – Los Angeles Price Weighted Avg. ($ per sf/unit) $381 $169 $354 $202,482 $908,005 Median ($ per sf/unit) $247 $122 $267 $125,885 $134,318 All Transactions Volume (Mil) $33,537 $14,529 $12,261 $22,322 $17,697 Size Weighted Avg. ($ per sf/unit) $263 $109 $193 $132,839 $292,866 “Industrial is the only investment Price Weighted Avg. ($ per sf/unit) $368 $159 $325 $190,024 $891,092 opportunity, unless Median ($ per sf/unit) $200 $116 $183 $104,762 $99,950 you use cash to Capitalization Rates (All Transactions) make a perfect buy.” Range (%) 2.8 - 12.4 3.7 - 9.1 3.0 - 8.8 3.1 - 10.2 4.0 - 13.2 – Tucson Weighted Avg. (%) 5.5 6.1 6.3 5.5 8.3 Median (%) 6.4 6.4 6.3 5.6 8.4 Source: RERC. Investment Trends Copyright© 2008 by Real Estate Research Corporation (RERC) and the CCIM Institute. 126 Quarterly WestOfficePropertySector RERC Weighted Avg. Cap Rate - 2Q 2008 8.0% 8.0% West U.S. Total 7.5% 7.5% Avg. Capitalization Rate n During second quarter 2008, many CCIM Institute desig- 7.0% 7.0% nees and candidates noted that the office sector offered 6.5% 6.5% the lowest investment potential in the West region. Re- spondents stated that the market is overbuilt, and that ris- 6.0% 6.0% ing vacancy rates will drive asking rents lower. 5.5% 5.5% n The size- and price-weighted average price per square 5.0% 5.0% foot of office space in the West regional office sector de- 4.5% 4.5% creased by 9.4 percent and 4.3 percent, respectively, dur- ing second quarter 2008. The weighted average and me- Denver Seattle Tucson Las Vegas Phoenix San Diego Los Angeles Sacramento San Francisco dian capitalization rates increased by 10 basis points. RERC Size-Weighted Avg. PPSF - 2Q 2008 RERC Price-Weighted Avg. PPSF - 2Q 2008 $450 West $450 $600 West $600 U.S. Total U.S. Total $400 Size-Weighted Average PPSF $400 Price-Weighted Average PPSF $500 $500 $350 $350 $300 $300 $400 $400 $250 $250 $300 $300 $200 $200 $200 $200 $150 $150 $100 $100 $100 $100 Denver Seattle Tucson Denver Seattle Tucson Honolulu Las Vegas Phoenix Portland San Diego Honolulu Las Vegas Phoenix Portland San Diego Los Angeles SacramentoSalt Lake City San Francisco Los Angeles SacramentoSalt Lake City San Francisco West Office Transactions (7/1/07 - 6/30/08) Volume Size-weighted Price-weighted Median Average (millions) Average ($/sf) Average ($/sf) ($/sf) Cap Rate (%) Denver $2,391 $137 $183 $123 7.7 Honolulu $284 $243 $269 $246 – Las Vegas $739 $274 $308 $274 7.0 Los Angeles $8,292 $306 $365 $262 5.3 Phoenix $3,290 $195 $230 $167 6.4 Portland $866 $239 $318 $160 – Sacramento $448 $199 $215 $190 7.1 Salt Lake City $426 $208 $275 $122 – San Diego $2,813 $354 $455 $256 5.8 San Francisco $10,102 $386 $504 $261 4.9 Seattle $2,456 $241 $283 $227 5.5 Tucson $251 $144 $174 $154 7.3 West Total $33,537 $263 $368 $200 5.5 U.S. Total $109,372 $227 $417 $145 5.6 Source: RERC. Investment Trends Copyright© 2008 by Real Estate Research Corporation (RERC) and the CCIM Institute. 127 Quarterly WestIndustrialPropertySector RERC Weighted Avg. Cap Rate - 2Q 2008 10% 10% West U.S. Total Avg. Capitalization Rate 9% 9% n The West regional industrial market remained quite sta- ble during second quarter 2008. The volume of industrial 8% 8% property transactions declined by about 25 percent from last quarter. 7% 7% n With average prices of industrial property space remaining 6% 6% stable, the median capitalization rate in the West region 5% 5% remained at 6.4 percent while the weighted-average capi- talization rate declined 10 basis points. Denver Seattle Tucson Honolulu Las Vegas Phoenix Portland San Diego Los Angeles SacramentoSalt Lake City San Francisco RERC Size-Weighted Avg. PPSF - 2Q 2008 RERC Price-Weighted Avg. PPSF - 2Q 2008 $200 $200 $300 $300 West West U.S. Total U.S. Total $175 Size-Weighted Average PPSF $175 Price-Weighted Average PPSF $250 $250 $150 $150 $125 $125 $200 $200 $100 $100 $150 $150 $75 $75 $100 $100 $50 $50 $25 $25 $50 $50 Denver Phoenix Seattle Tucson Denver Phoenix Portland Seattle Tucson Honolulu Las Vegas Portland San Diego Honolulu Las Vegas San Diego Los Angeles SacramentoSalt Lake City Los Angeles SacramentoSalt Lake City San Francisco San Francisco West Industrial Transactions (7/1/07 - 6/30/08) Volume Size-weighted Price-weighted Median Average (millions) Average ($/sf) Average ($/sf) ($/sf) Cap Rate (%) Denver $687 $70 $87 $80 7.5 Honolulu $100 $183 $268 $249 9.0 Las Vegas $450 $149 $184 $162 6.0 Los Angeles $4,790 $127 $178 $140 5.6 Phoenix $2,359 $89 $113 $103 6.8 Portland $355 $93 $121 $84 6.6 Sacramento $140 $79 $95 $91 6.0 Salt Lake City $138 $65 $94 $73 6.5 San Diego $1,296 $172 $227 $161 6.2 San Francisco $1,799 $136 $199 $141 6.1 Seattle $1,261 $124 $158 $120 5.6 Tucson $188 $84 $93 $81 7.2 West Total $14,529 $109 $159 $116 6.1 U.S. Total $39,252 $71 $129 $73 6.9 Source: RERC. Investment Trends Copyright© 2008 by Real Estate Research Corporation (RERC) and the CCIM Institute. 128 Quarterly WestRetailPropertySector RERC Weighted Avg. Cap Rate - 2Q 2008 8.0% 8.0% West U.S. Total 7.5% 7.5% Avg. Capitalization Rate n Average and median prices of retail properties in the West 7.0% 7.0% regional market were approximately $40 to $50 higher per square foot than average prices in the national retail mar- 6.5% 6.5% ket during second quarter 2008. In addition, average prices declined slightly for the West and national retail markets 6.0% 6.0% during second quarter, as weighted average capitalization 5.5% 5.5% rates increased 10 basis points. 5.0% 5.0% n Transaction volume of retail property sales declined nearly 25 percent in the West region during second quarter 2008 Denver Seattle Tucson Las Vegas Phoenix Portland San Diego Los Angeles SacramentoSalt Lake City San Francisco and about 40 percent from year-ago prices. RERC Size-Weighted Avg. PPSF - 2Q 2008 RERC Price-Weighted Avg. PPSF - 2Q 2008 $350 $350 $550 $550 West West U.S. Total U.S. Total $300 $300 Price-Weighted Average PPSF Size-Weighted Average PPSF $450 $450 $250 $250 $350 $350 $200 $200 $250 $250 $150 $150 $150 $150 $100 $100 $50 $50 $50 $50 Denver Seattle Tucson Denver Seattle Tucson Honolulu Las Vegas Phoenix Portland San Diego Honolulu Las Vegas Phoenix Portland San Diego Los Angeles SacramentoSalt Lake City San Francisco Los Angeles SacramentoSalt Lake City San Francisco West Retail Transactions (7/1/07 - 6/30/08) Volume Size-weighted Price-weighted Median Average (millions) Average ($/sf) Average ($/sf) ($/sf) Cap Rate (%) Denver $769 $159 $223 $127 7.3 Honolulu $188 $250 $406 $314 – Las Vegas $894 $344 $437 $263 6.2 Los Angeles $3,113 $249 $471 $241 5.9 Phoenix $1,326 $156 $214 $175 6.7 Portland $310 $133 $155 $148 6.8 Sacramento $406 $225 $287 $240 6.4 Salt Lake City $171 $116 $162 $146 7.5 San Diego $901 $233 $346 $223 6.1 San Francisco $1,215 $229 $340 $245 6.2 Seattle $875 $232 $321 $204 5.9 Tucson $134 $149 $211 $126 6.9 West Total $12,261 $193 $325 $183 6.3 U.S. Total $46,283 $153 $278 $130 6.5 Source: RERC.