Our Professionals

Chris

Fraser, CCIM

Jeremy

Willits

Jon

Chalfie

Johnny

Bevon

Mike

Ferrer, CCIM

Todd

Garrett, CCIM

Gregg

Legerton

Bill

Goodwin

Our Staff

Taylor

Massey

Charlene

Aydelotte

Courtney

Ray

Robert Bach

Senior Vice President

Chief Economist

Grubb&Ellis

2012 Commercial RE Forecast Robert Bach

SVP, Chief Economist

8

-4%

-2%

0%

2%

4%

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12-F

'13-F

Historic

Wells Fargo

PNC

Goldman

Source: BEA, Goldman Sachs, PNC, Wells Fargo

Gross Domestic Product, Historic & Forecast Annualized Percent Change

9

-2%

0%

2%

4%

6%

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12-F

'13-F

Historic

Wells Fargo

PNC

Goldman

Consumer Price Index, Historic & Forecast Annual Percent Change

Source: BLS, Goldman Sachs, PNC, Wells Fargo

10

1%

2%

3%

4%

5%

2008 2009 2010 2011 2012

Historic

Wells Fargo

PNC

Goldman

10 Year Treasury Yield, Historic & Forecast End of Quarter

Source: Federal Reserve, Goldman Sachs, PNC, Wells Fargo

11

-6

-5

-4

-3

-2

-1

0

1

2

3

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12-F

'13-F

Mil

lio

ns

Historic

Wells Fargo

PNC

Grubb & Ellis

Source: BLS, PNC, Wells Fargo, Grubb & Ellis

Payroll Job Change Annual

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

U.S.

G'ville

Columbia

Charleston

Myrtle Bch

12 Source: BLS, Grubb & Ellis

Job Losses Since Recession Began 12/2007 U.S. vs. Selected South Carolina Metros

13 Source: Grubb & Ellis

Office Vacancy & Class A Rent* National Forecast

* Weighted average

asking rent $/SF/year

gross

% Vacant Rent*

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12-F

% Vacant 17.4% 17.7% 16.8% 14.6% 13.6% 13.0% 14.8% 17.4% 17.7% 17.3% 16.0%

$ Rent* 28.72 30.09 30.32 33.91 35.95 36.69 35.74 32.50 32.93 33.49 34.16

$20

$22

$24

$26

$28

$30

$32

$34

$36

$38

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

% Vacant

$ Rent*

14 14

30

35

40

45

50

55

60

65

'00 '02 '04 '06 '08 10

ISM Manufacturing Index Values > 50 = Expansion

90

95

100

105

110

115

'00 '02 '04 '06 '08 10

DOT Freight Index 2000 = 100

Source: ISM, DOT, Grubb & Ellis

Industrial Demand Drivers

15 Source: Grubb & Ellis

Industrial Vacancy & Warehouse Rent* National Forecast

* Weighted average

asking rent $/SF/year

NNN

% Vacant Rent*

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12-F

% Vacant 9.5% 9.8% 9.4% 8.1% 7.7% 7.7% 8.8% 10.7% 10.4% 9.7% 8.7%

$ Rent* 4.33 4.21 4.38 4.54 4.67 4.79 4.68 4.36 4.33 4.26 4.47

$4.00

$4.25

$4.50

$4.75

$5.00

5%

6%

7%

8%

9%

10%

11%

% Vacant

$ Rent*

16

-15%

-10%

-5%

0%

5%

10%

15%

'07 '08 '09 '10 '11

Monthly Retail Sales % Change Year Over Year, SA

Total Core

Source: Census, CoStar, Grubb & Ellis

Retail Demand Drivers

0%

2%

4%

6%

8%

10%

12%

14%

80 85 90 95 '00 '05 10

Personal Saving Rate SAAR

17 Source: Reis, Grubb & Ellis

Retail Vacancy & Rent* National Forecast

* Neighborhood &

community centers,

asking rent $/SF/year

NNN

% Vacant Rent*

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11-F '12-F

% Vacant 7.3% 7.2% 7.0% 6.8% 7.1% 7.5% 8.9% 10.6% 11.0% 11.1% 11.0%

$ Rent* 16.68 17.14 17.62 18.22 18.92 19.46 19.52 19.13 18.99 18.96 19.10

$15

$16

$17

$18

$19

$20

5%

6%

7%

8%

9%

10%

11%

12%

% Vacant

$ Rent*

60%

62%

64%

66%

68%

70%

'80 '90 '00 '10

Homeownership Rate By Quarter, Seasonally Adjusted

18 18

3.9

-3.5

4.7 4.3

-4

-2

0

2

4

6

1980s 1990s 2000s 2010s

20-34 Year-Old Cohort Change by Decade

Source: Census, Grubb & Ellis

Percent

Apartment Demand Drivers

Millions

19 Source: Reis, Grubb & Ellis

Apartment Vacancy & Rent* National Forecast

* Projects w/ at least

50 units, asking rent

% Vacant Rent*

'02 '03 '04 '05 '06 '07 '08 '09 '10-F '11-F '12-F

% Vacant 6.3% 6.9% 6.7% 5.7% 5.8% 5.7% 6.7% 8.0% 6.6% 5.3% 4.9%

$ Rent* 889.0 902.0 921.0 944.0 982.0 1,025 1,050 1,026 1,043 1,066 1,096

$800

$900

$1,000

$1,100

$1,200

4%

5%

6%

7%

8%

9%

% Vacant

$ Rent*

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

'00 '02 '04 '06 '08 '10

Moody's/REAL CPPI 2000-Q4 = 1.0

All 6-city Trophy Distress

104 127

232

312

363

514

146

55

126

200

250

$0

$100

$200

$300

$400

$500

$600

'02 '04 '06 '08 '10 '12-F

CRE Investment by Quarter +75% in 2011, + 25% in 2012

Investment Market Outlook

Source: Real Capital Analytics, Grubb & Ellis

Billions

Source: Real Capital Analytics, Grubb & Ellis

Average Cap Rates By Property Type

6.6%

6.3%

8.4%

7.6%

7.8%

6.4%

7.4%

7.8%

7.3% 7.5%

5%

6%

7%

8%

9%

Apartment Hotel Industrial Office Retail

2010

2011

-$15,000

-$10,000

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

2008 2009 2010 2011

Monthly Additions & Reductions to Distress

Additions Workouts

$0

$100

$200

$300

$400

2008 2009 2010 2011

Total Outstanding Distress

Troubled REO Restructured Resolved

Distressed Assets

Source: Real Capital Analytics, Grubb & Ellis

Billions Billions

0

100

200

300

400

500

0%

2%

4%

6%

8%

10%

'01 '03 '05 '07 '09 '11

Sp

read

(b

asis

po

ints

)

Cap

Rate

& 1

0-y

ea

r Y

ield

10-yr. Yield Cap Rate Spread

23 Source: Real Capital Analytics

Avg. Cap Rate vs. 10-year Treasury Yield Quarterly

2012 Commercial RE Forecast Robert Bach

SVP, Chief Economist

Mary Graham

Senior Vice President

Charleston Metro Chamber of Commerce

char l est on met r o chamber of commer ce

The Charleston Region: 2012 and Beyond

Grubb&Ellis|WRS

February 15, 2012

Top Three Globally

• Building wide-body

commercial aircraft

• R&D wind turbines

• Tourism Destination

Charleston Has Biggest Brain Gain in U.S.

2010 Best Performing Cities

Charleston ranked among nation’s top

20 “large cities”

Milken Institute

October 2010

Best Towns of 2011

Charleston ranked 5th

Outside Magazine

September 2011

Best Places for Business

& Careers

Charleston MSA ranked in

top 50

Forbes July 2011

Best Cities for Job Growth

Charleston region ranked 8th,

up 17 spots from last year.

New Geography May 2011

America's Favorite Cities

Charleston ranks #1

Travel + Leisure Magazine

November 2010

World's Best City

Charleston ranked #3 in

the world

CNNGo October 2011

#1 in North America

#3 in the world

Tourist Destination

Conde’ Nast Traveler

October 2011

Charleston’s Recognition & Rankings

Boeing’s 2nd 787

Dreamliner assembly line

• Est: 15,000 jobs (direct & indirect)

$5.9 billion statewide impact

Wind Turbine Drive Train Testing Facility

• $98 million DOE-backed facility – one of only

three and largest in the world

• Est: 20,000 jobs (direct & indirect) statewide

• Opportunity to attract global manufacturing &

R&D investments

Significant Developments

Southwest Airlines

• Began service March 13, 2011

Population Trends

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1950 1960 1970 1980 1990 2000 2010 2020 est.

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Labor Force

Employment

Employment Growth

2000 - 2011

5%

8%

3%

13%

4%

2%

4%

14%

12%

12%

3%

20%

Natural Resources, Mining, & Construction

Manufacturing

Wholesale Trade

Retail Trade

Transportation and Utilities

Information

Financial Activities

Professional and Business Services

Education and Health Services

Leisure and Hospitality

Other Services

Government

Employment By Sector

Target Industries

Startup

Retain/

Expand

Recruit

Aerospace Biomedical

Startup

Retain/

Expand

Recruit

Startup

Retain/

Expand

Recruit

Startup

Retain/

Expand

Recruit

Mid- to

Long-Term

Mid- to

Long-Term

Immediate Immediate

To Mid-Term

Advanced

Security & IT

Wind

Energy

Target Tactics

Boeing 787 Assembly Operation

– 5,900 employees

– $ 4.6 billion annual economic impact

– One of three places in world

– First delivery 2nd Qtr 2012

Aerospace

$44.8 billion economic impact

($7 billion in the Charleston region)

260,800 jobs

(50,000+ in the Charleston region)

Cargo Diversification Strategy

–1.4 million TEUs

–BMW – RO/RO

–Breakbulk Cargo

New $500 million terminal

The Port of Charleston

Draft 12.04 m (39.5’)

Draft 15.2 m (50’)

Current Locks

Vessel Max: 4,800 TEUs

New Locks

Vessel Max : 12,600 TEUs

33.5m

(110’)

12.8m (42’)

55m (180’)

18.3m (60’)

*Courtesy of Panama Canal Authority

Panama Canal Game Changer

MSC Northern Justice

8,440 TEU / 1090’ LOA Charleston Harbor / May 12, 2010

• 10 major medical centers

• 2,000 physicians

• Medical centers locally employ 20,000 +

• 26,000 total workers in healthcare services industry

• $243 million R&D at MUSC for fiscal year 2011, marking the 15th consecutive year of continuous growth

Medical Industry

• $4.7 billion annual economic impact

• 29,000 active, civilian and contract personnel

• Airlift, Sealift and Prepositioning

- One of top ranked military strategic ports

- One of 12 Joint Base initiatives

• SPAWAR Atlantic

- 2,600 employees

- 8,000 contract workers / 80+ defense contractors

- 6,000 visitors per year

Joint Base Charleston

Joint Base Charleston

• Navy Nuclear Training Command /

Training School

- 3,200 students per year

• Federal Law Enforcement Training Center

- Maritime Law Enforcement Training

- 12,500 annual graduates

• State Department

- 800 employees

- Global Financial Services, Passport Office

• Workforce Skills/Education

• Infrastructure

• International Business

Location

• Managing Growth

Key Challenges

char l est on met r o chamber of commer ce

Mary Graham, CCR, IOM, CCE

Sr. Vice President Business Advocacy

843.805.3043

mgraham@charlestonchamber.org

Chris Fraser, CCIM

President

Grubb&Ellis|WRS

How are we doing?

Residential Inventory

Employment

Industrial Market

Industrial Vacancy

5%

10%

15%

20%

25%

30%

2008 2009 2010 2011

General Industrial R&D/Flex

WH/Dist Combined

Avg. Asking Rental Rates

$2

$4

$6

$8

$10

2008 2009 2010 2011

General Industrial R&D/Flex

WH/Dist Combined

DOD to Ask for Two New BRAC Rounds, Sources Say

January 25, 2012

The Pentagon is planning to request Congress authorize two new base closure rounds to help the department cut almost a half a trillion dollars in spending over the next decade, Air Force Times reported Wednesday. Officials would request one BRAC round in 2013 and the next in 2015, one source told the publication. The department’s intention to conduct one or more BRAC rounds is not unexpected given the current budget environment. Many officials already believed the 2005 round failed to eliminate all of the department’s excess capacity. Also, the spending cuts imposed on the military are expected to result in the elimination of tens of thousands of troops and cuts in aircraft orders, further reducing the need for military infrastructure.

Closures likely would disproportionately fall on Army and Air Force installations due to the specific cuts planned, the Times reported.

Panama Canal???

Norfolk Southern Intermodal Terminal at Charlotte Douglas Airport planned…volume up!

2006 – 58% of N&S freight moved from West Coast

2011 – 61% of N&S freight moved from East Coast

Four extra feet of depth is equal to 8600 extra tons of wheat!

Industrial Occupancy & TEU

Source – Integra Realty Resources

Charleston

Industrial 2012 Vacancy Forecast

5%

10%

15%

20%

25%

30%

2008 2009 2010 2011 2012-F

General Industrial R&D/Flex

WH/Dist Combined

Office Market

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011

CBD Suburban Combined

Office Vacancy

$18

$20

$22

$24

$26

$28

2007 2008 2009 2010 2011

Class A Class B

Avg. Asking Rental Rates

22 Relevant Office Properties Changed Hands in 2011

3 (14% of total sales) Bank owned buildings

• average of $96/sf in partial shell condition

9 (41% of total sales) Bank owned condos

• average of $129/sf in completed condition

7 (32% of total sales) Market type buildings arms length transactions

• average of $182/sf

3 (14% of total sales) Market type condo transactions

• averaging $130/sf

Healthcare / Medical Sector

Institutional Movement

• Hospitals purchasing medical practices to control

referral sources & income stream

• Doctors selling for fixed income/security during uncertain

times especially regarding possible future cuts in reimbursements

Mt. Pleasant since 4/2010 • MUSC – Specialty Care 84,000 SF

Dr.’s will relocate in the 2nd and 3rd quarter of 2012

Vacancy will rise throughout Mt. Pleasant

• East Cooper Hospital

250,000 SF

130 Beds

• Roper Hospital

200,000 SF

85 Beds

Carnes Crossroads / Moncks Corner

Carnes Crossroads Plans

146,000 SF

50 Beds

Moncks Corner Plans

145,000 SF

50 Beds

* Appeals from both parties need to be worked out in the courts before final approval.

Biomedical Research

Horizon Project MUSC, SCRA and City of Charleston

Business Incubators Thrive!

•Over 61,000 SF

•Assisted over 100 Companies

•Notable

•PeopleMatter

•Avista Solutions

Charleston

Charleston

Office 2012 Vacancy Forecast

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012-F

CBD Suburban Combined

Retail Market

Retail Vacancy

4%

6%

8%

10%

2009 2010 2011

CBD Suburban Combined

Avg. Asking Rental Rates

$12

$14

$16

$18

2009 2010 2011

Value Based Trend

Charleston

Retail 2012 Vacancy Forecast

4%

6%

8%

10%

2009 2010 2011 2012-F

CBD Suburban Combined

Investment Market

What is the Outlook for 2012?

Thank you!